- USD/CAD stays on the front foot around one-week high.
- Cautious sentiment ahead of the key data backs USD.
- US-China, Hong Kong and covid headlines will offer intermediate clues.
- Tapering woes, upbeat expectations from US NFP keep buyers hopeful.
USD/CAD eases to 1.2115 in a swift pullback from a weekly top during early Friday’s quiet session. Even so, the Loonie pair retains the previous day’s bullish impulse while flashing 0.08% intraday gains by the press time.
Alike other major currency pairs, USD/CAD also portrayed the magnificent jump of the US dollar, backed by safe-haven bids on Thursday. Behind the moves were the Fed’s dialing of a support measure used throughout the pandemic as well as strong prints of second-tier job and inflation data, which in turn magnified the tapering woes.
Market sentiment remains sluggish on Friday as traders await monthly employment data from the US and Canada. Also favoring the risk-off mood are headlines suggesting the US-China tussles over US President Biden’s blocking of 59 Chinese companies and arrest of a Hong Kong activist.
Amid these plays, US Treasury yields remain firm whereas the stock futures stay mildly offered. Further, the US dollar index (DXY) refreshes a three-week high, before recently easing to 90.52, up 0.03% on a day.
It’s worth noting that US President Joe Biden’s speech and comments from Fed Chairman Jerome Powell will be extra catalysts to watch, in addition to the US NFP data and Canadian jobs report.
Given the more likelihood of a strong US number fueling the reflation risks, the safe-haven bids can keep favoring the USD/CAD bulls should there be no negative surprises.
Technical analysis
A clear break of a three-week-old falling trend line and 21-day SMA, respectively around 1.2105 and 1.2090, backs the USD/CAD bulls. However, a previous support line from March 18 could test the up-moves around 1.2180.
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