- USDCAD is struggling to capitalize on its modest intraday rally amid modest dollar weakness.
- Bearish crude oil prices weaken the CAD and help limit the pair’s decline.
- Traders now await the US CPI report before opening new directional positions.
The pair USDCAD fades an initial rally to a fresh weekly high at 1.3560 and pulls back quickly to the 1.3525-1.3530 area. However, the decline appears supported amid falling oil prices, which tend to weigh on the commodity-linked CAD. At the time of writing, the pair holds stable around 1.3550.
In fact, the crude WTI extends this week’s sharp pullback from two-month highs and remains under pressure for the third day in a row amid the concern about fuel demand in China. A string of weak economic data from China points to sluggish growth in the world’s biggest oil consumer, which in turn acts as a headwind for black gold. That said, modest US dollar weakness is likely to prevent the USDCAD from rising significantly.
Traders could also refrain from opening aggressive positions and would prefer to wait on the sidelines before the release of the latest US consumer inflation figures. The crucial US CPI report will play a key role in determining the Fed’s policy tightening path, which in turn will influence dollar price dynamics. Therefore, it will be prudent to wait for strong continuation buying before confirming that the USDCAD has formed a short-term bottom.
Even from a technical point of view, post-NFP break below 50-day SMA support near 1.3500 psychological level favors bears. This warrants some caution for the bulls before positioning for any significant appreciation moves for the USDCAD pair. That said, a surprise to the upside in the US CPI will reignite bets for more aggressive Fed tightening and boost the US currency, negating the negative bias in the pair.
USDCAD technical levels
Source: Fx Street
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