- A combination of factors causes strong selling around the USDCAD on Friday.
- Rising oil prices underpin the CAD and put pressure on amid a weaker dollar.
- Recession fears and aggressive Fed prospects should help limit the slide.
- Also, traders could wait for the monthly jobs report from the US and Canada.
The pair USDCAD is under heavy selling pressure on Friday and extends the previous day’s retracement from an almost two-week high, levels just above the 1.3800 level. The bearish trajectory remains uninterrupted during the first half of the European session and drags the pair below 1.3650.
The news that the rich countries of the Group of Seven (G7) agreed to establish a fixed price for Russian crude exports raised concerns about global supply shortages. This, in turn, triggers a further rise in oil prices, underpinning the CAD, currency linked to raw materials. On the other hand, the US dollar stalls the strong post-FOMC rally and turns out to be another factor dragging down the USDCAD pair. However, the fundamental background warrants some caution before positioning for another move lower.
Investors remain concerned that a recession in the United States, the world’s largest oil consumer, and China’s zero-COVID policy will dent fuel demand.. This could curb any significant rise in the commodity. Apart of this, the most aggressive stance adopted by the Federal Reserve should continue to act as a tailwind for the dollar and help limit USDCAD’s decline. Indeed, Fed Chairman Jerome Powell said on Wednesday that it was premature to talk of a pause in the rate-hike cycle.
Powell added that the terminal fee will remain higher than anticipated, which continues to support elevated US Treasury yields and favors dollar bulls. Elsewhere, traders will prefer to wait for the release of monthly US and Canadian employment data, due later in the American session. For now, though, it looks like the pair has snapped a six-day winning streak, erasing a significant portion of its weekly gains, and remains at the mercy of dollar and oil price dynamics.
USDCAD technical levels
Source: Fx Street
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