USD/CAD sees a quick drop from monthly tops near 1.2860, US data eyed

USD/CAD stretched Thursday’s rally and refreshed one-month highs above 1.2850 ahead of the European open, as investors scurried to the safe-haven US dollar amid a renewed risk-aversion wave.

The haven demand for the greenback is on the rise, as the coronavirus surge continues globally and threatens the economic recovery, dampening the investors’ sentiment.

Meanwhile, the Fed decision fell short of markets’ expectations while the uncertainty of the size and timing of the US stimulus also keeps the traders on the edge.

At the time of writing, the major rallies 0.40% to 1.2848, having recorded fresh one-month highs at 1.2861 in the last hour. The pair is set to end the first month of this year on a positive note, snapping three straight months of declines.

On the CAD-side of the equation, the downbeat tone around WTI prices undermines the resource-linked loonie, providing an additional boost to the spot. Oil remains weighed by the demand recovery concerns amid covid induced lockdowns and travel restrictions in major economies.

In the latest update, Germany’s Interior Ministry confirmed that Europe’s top economy is preparing entry restrictions for travelers from the UK, Brazil and South Africa, in light of the new covid strain contagion.

Next of relevance for USD/CAD traders remain the US weekly jobless claims, Q4 GDP release and Canadian housing data for fresh trading impetus. The focus will also remain on the stimulus and covid developments.

USD/CAD: Technical levels

“The next relevant target on the upside is pegged near the 1.2900 mark ahead of late December swing highs, around the 1.2955 region. On the flip side, the 1.2800 round-figure mark now seems to protect the immediate downside. Any subsequent fall might now be seen as a buying opportunity and remain limited near the wedge resistance breakpoint, around mid-1.2700s, “FXStreet’s Analyst Haresh Menghani notes.

USD/CAD: Additional levels