- USD/CAD is moving higher on Friday and is supported by a combination of factors.
- Weakening crude oil prices weigh on the CAD and act as a tailwind for the pair amid a bullish dollar.
- Traders are watching Canadian Retail Sales and US PMIs for some momentum ahead of Powell’s speech.
The pair USD/CAD attracts new purchases on the last day of the week and breaks back above the psychological level of 1.3500 at the start of the European session. However, the pair remains below the highest level since July 2020 touched on Thursday at 1.3544.
Despite concerns about global supply shortages, deteriorating fuel demand outlook continues to weigh on crude oil prices and weighs on the CAD, currency linked to raw materials. Apart of this, strong bullish sentiment surrounding the US dollar, reinforced by aggressive expectations around the Fed, acts as a tailwind for the USD/CAD pair.
It is worth remembering that the US central bank signaled on Wednesday that likely to carry out more aggressive rate hikes to limit inflation. This remains supportive of the current rise in US Treasury yields, which, coupled with the prevailing risk environment, is benefiting the safe-haven dollar.
Market sentiment remains fragile given the concern that rapidly rising borrowing costs will lead to a deeper global economic downturn. In addition, concerns that China’s covid-zero policy will dent fuel demand is putting pressure on oil prices. That said, geopolitical risks seem to give black gold some support.
However, the fundamental background suggests that the path of least resistance for the USD/CAD pair is to the upside. Even technically, this week’s break of resistance marked by the upper end of a multi-month ascending channel supports the prospects for an extension of the near-term move higher.
Market participants are now awaiting the release of monthly Canadian retail sales data, which, along with preliminary US PMI data, could give the USD/CAD pair some lift. Also, traders will follow Fed Chairman Jerome Powell’s speech which could spark short-term opportunities.
USD/CAD technical levels
Source: Fx Street
With 6 years of experience, I bring to the table captivating and informative writing in the world news category. My expertise covers a range of industries, including tourism, technology, forex and stocks. From brief social media posts to in-depth articles, I am dedicated to creating compelling content for various platforms.
