On Friday, the USD/CAD fell slightly, reversing some of the overnight advances to multi-month highs.
The loonie was supported by a strong comeback in oil prices, which put downward pressure on the currency.
Bullish traders were disappointed by the lackluster USD demand ahead of the US Retail Sales numbers.
During the first part of the European session, the USD/CAD pair stayed on the defensive, staying towards the lower end of its daily trading range, around 1.2570.
The USD/CAD pair slipped lower on the penultimate day of the week, eroding some of the previous day’s significant gains to near three-month highs, after struggling to find acceptance above the 1.2600 mark. A critical aspect that functioned as a headwind for the major was a muted demand for the US currency. A goodish bounce in crude oil prices, on the other hand, supported the commodity-linked loonie and put pressure on the pair.
The safe-haven greenback was unable to profit from the overnight gain surge despite a generally positive tone in the financial markets. However, the USD’s fall was limited by a sharp rise in US Treasury bond yields and aggressive Fed predictions. Despite Fed Chair Jerome Powell’s dovish testimony, investors appear to believe the US central bank would tighten policy sooner rather than later in response to rising inflationary pressures.
The Canadian currency, on the other hand, benefited from a rise in crude oil prices. However, escalating COVID-19 outbreaks involving the Delta strain in some nations, as well as concerns about the OPEC+ plan to enhance supply, cast a pall over the black gold’s prospects. As a result, the path of least resistance for the loonie remains to the negative, implying that the USD/CAD pair can expect further gains.
Market players are now anticipating the publication of monthly Retail Sales statistics later in the early North American session, which will be a highlight of the US economic calendar. This, together with US bond yields and overall market risk sentiment, might affect the USD and provide the USD/CAD pair a boost. Aside from that, oil price fluctuations will lead to the creation of some short-term trading chances in the USD/CAD pair./n
