USD/CAD sits near one-week tops, around 1.2125 ahead of US/Canadian jobs report

The USD/CAD pair edged higher through the first half of the European session and was last seen trading near one-week tops, around the 1.2125-30 region.

The pair built on the previous day's positive move and gained some follow-through traction for the second consecutive session on Friday. The uptick allowed the USD/CAD pair to move further away from multi-year lows, around the key 1.2000 psychological mark touched earlier this week and was sponsored by a modest US dollar strength.

The greenback remained well supported by Thursday's upbeat US macro releases, which indicated that the US recovery is gathering pace. The stronger data also fueled speculations that the Fed may bring forward the timeline for tapering its bond purchases. This, in turn, pushed the US Treasury bond yields higher across the board.

Meanwhile, the latest developments kept a lid on the recent optimism, which was evident from a softer risk tone. This was seen as another factor that acted as a tailwind for the safe-haven greenback. That said, the recent bullish run in oil prices underpinned the commodity-linked loonie and might cap gains for the USD/CAD pair.

Moreover, investors might also refrain from placing aggressive bets, rather prefer to wait on the sidelines ahead of Friday's release of the closely watched US monthly jobs data. The US NFP report will be one of the most important pieces of economic data that would set the tone for the upcoming FOMC meeting later this month.

Traders will further take cues from the simultaneous release of the Canadian employment details. This, along with oil prices dynamics, will influence the Canadian dollar and provide a fresh directional impetus to the USD/CAD pair.

Technical levels to watch