- Retreating oil prices undermined the loonie and assisted USD/CAD to gain traction on Friday.
- A slump in the US bond yields kept the USD bulls on the defensive and acted as a headwind.
- Investors eye Canadian Retail Sales for some impetus ahead of the Fed and BoC next week.
The USD/CAD pair maintained its bid tone heading into the European session and was last seen trading just a few pips below the daily high, around the 1.2520 region.
The pair built on the previous day's rebound from the 1.2450 support area and gained some follow-through traction on Friday amid the ongoing retracement slide in crude oil prices. An increase in US crude and fuel stockpiles prompted investors to take some profits off the table following the recent strong rally to the highest level since 2014. This, in turn, undermined the commodity-linked loonie and extended some support to the USD/CAD pair.
That said, a strong demand outlook and short-term supply disruptions assisted the black gold to trim a part of its intraday losses to the weekly low. Apart from this, speculations that the Bank of Canada could increase rates as early as next week – amid a jump in Canada’s annual inflation rate to a three-decade high in December – act as a tailwind for the Canadian dollar. This, along with subdued US dollar demand, capped the upside for the USD/CAD pair.
The greenback remained on the defensive in the wake of a further pullback in the US Treasury bond yields from multi-year highs, though a combination of factors helped limit losses. The prevalent risk-off environment, along with the prospects for an eventual Fed lift-off in March, should act as a tailwind for the buck. Investors might also refrain from placing aggressive bets heading into next week’s key central bank event risks – the Fed and BoC on Wednesday.
In the meantime, traders on Friday will take cues from the Canadian monthly Retail Sales data, due later during the early North American session. Nevertheless, the fundamental backdrop makes it prudent to wait for a strong follow-through buying before confirming that the recent pullback from 2021 high, around the 1.2965 region has run its course.
Technical levels to watch
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD clings to daily gains above 1.0650
EUR/USD gained traction and turned positive on the day above 1.0650. The improvement seen in risk mood following the earlier flight to safety weighs on the US Dollar ahead of the weekend and helps the pair push higher.
GBP/USD recovers toward 1.2450 after UK Retail Sales data
GBP/USD reversed its direction and advanced to the 1.2450 area after touching a fresh multi-month low below 1.2400 in the Asian session. The positive shift seen in risk mood on easing fears over a deepening Iran-Israel conflict supports the pair.
Gold holds steady at around $2,380 following earlier spike
Gold stabilized near $2,380 after spiking above $2,400 with the immediate reaction to reports of Israel striking Iran. Meanwhile, the pullback seen in the US Treasury bond yields helps XAU/USD hold its ground.
Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in Premium
Bitcoin price shows no signs of directional bias while it holds above $60,000. The fourth BTC halving is partially priced in, according to Deutsche Bank’s research.
Week ahead – US GDP and BoJ decision on top of next week’s agenda
US GDP, core PCE and PMIs the next tests for the Dollar. Investors await BoJ for guidance about next rate hike. EU and UK PMIs, as well as Australian CPIs also on tap.