- A combination of factors assisted USD/CAD to stage a modest bounce from multi-year lows.
- A pullback in the equity markets benefitted the safe-haven USD and extended some support.
- Sliding crude oil prices undermined the loonie and remained supportive of the positive move.
The USD/CAD pair edged higher through the early European session and climbed to fresh daily tops, around the 1.2680 region in the last hour.
The pair managed to gain some positive traction on the last trading day of the week and built on the previous day’s modest bounce from sub-1.2600 levels, or multi-year lows. A weaker tone surrounding crude oil prices undermined the commodity-linked loonie, which, in turn, was seen driving the USD/CAD pair higher.
Oil retreated further from 11-month highs touched last week and was weighed down by worries that the imposition of lockdown restrictions will curb fuel demand. The black gold was further pressured by data released on Wednesday, showing that US crude oil inventories surprisingly increased by 2.6 million barrels last week.
Apart from this, a modest pullback in the equity markets extended some support to the US dollar and provided an additional boost to the USD/CAD pair. Investors opted to take some profits off the table following the recent strong rally to record highs, which was driven by hopes for a massive US fiscal stimulus measures.
Investors have been pricing in the prospects for more aggressive fiscal spending in 2021 under Joe Biden’s presidency. This comes amid the optimism over the rollout of vaccines for the highly contagious coronavirus disease and fueled hopes for a strong global economic recovery, eventually boosting investors’ confidence.
Moving ahead, market participants now look forward to Friday’s economic docket, highlighting the release of Canadian monthly retail sales data and flash US PMI prints, for a fresh impetus. This, along with the official oil inventory data from the US, should assist investors to grab some meaningful trading opportunities.
Technical levels to watch