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  • A combination of factors assisted USD/CAD to gain traction for the second straight day on Friday.
  • The USD attracted some haven flows amid renewed worries about escalating US-China tensions.
  • Weaker oil prices undermined the loonie and remained supportive ahead of US/Canadian data.

The USD/CAD pair maintained its bid tone through the early part of the European trading session and was last seen hovering near three-day tops, around the 1.3365 region.

The pair gained traction for the second consecutive session on Friday and has now recovered around 130-140 pips from the 1.3235 region, or over five-month lows set on Wednesday. The positive momentum was sponsored by a combination of factors – a goodish pickup in the US dollar demand and mild weakness in crude oil prices.

The US President Donald Trump signed executive orders that ban US transactions with Chinese companies that own TikTok and WeChat. The development fueled worries about a further escalation in tensions between the world’s two largest economic and took its toll on the global risk sentiment, which benefitted the USD’s safe-haven status.

This coupled with some follow-through pullback in crude oil prices, now down around 0.80% for the day amid concerns over continuing fuel demand recovery, undermined the commodity-linked currency – the loonie. This, in turn, led to some follow-through short-covering move and remained supportive of the USD/CAD pair’s positive move.

Market participants now look forward to important macro releases from the US and Canada for a fresh impetus. The US economic docket highlights the release of the closely watched monthly jobs report (NFP). This, along with the Canadian employment details will produce some meaningful trading opportunities on the last day of the week.

Technical levels to watch