- A combination of supporting factors assisted USD/CAD to regain positive traction on Friday.
- Aggressive Fed rate hike bets amidst a cautious mood pushed the USD to a fresh 20-year peak.
- Recession fears capped oil prices, which undermined loonie and further extended support.
- Traders now look forward to the release of the monthly jobs report from the US and Canada.
The USD/CAD pair attracted fresh buying in the vicinity of mid-1.2900s on Friday and continued scaling higher through the first half of the European session. The pair has now reversed a major part of the overnight losses and was last seen trading just above the 1.3000 psychological mark.
Following the previous day's brief pause, the US dollar was back in demand and shot to a fresh two-decade high amid the prospects for faster rate hikes by the Fed. The market bets were reaffirmed by hawkish minutes of the June 14-15 FOMC meeting released on Wednesday, indicating that another 50 or 75 bps rate hike is likely at the July meeting. Apart from this, the prevalent cautious market mood also benefitted the safe-haven greenback, which, in turn, assisted the USD/CAD pair to regain positive traction on the last day of the week.
The market sentiment remains fragile amid concerns that rapidly rising interest rates and tightening financial conditions would pose challenges to global growth. Apart from this, the ongoing Russia-Ukraine war and the latest COVID-19 outbreak in China have been fueling recession fears. Meanwhile, the worsening economic outlook has raised concerns about the fuel demand recovery. This, in turn, acted as a headwind for crude oil prices, which undermined the commodity-linked loonie and provided an additional lift to the USD/CAD pair.
It would now be interesting to see if bulls are able to maintain their dominant position or refrain from placing fresh bets ahead of Friday's release of monthly jobs data from the US and Canada. The popularly known NFP report might infuse some volatility in the financial markets and drive the USD demand. Apart from this, traders will further take cues from oil price dynamics to grab short-term opportunities around the USD/CAD pair.
Technical levels to watch
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