- USD/CAD witnessed a sharp retracement slide from multi-year tops set on Thursday.
- Strong recovery in oil prices underpinned the loonie and weighed heavily on the pair.
- Some aggressive USD long-unwinding trade further collaborated to the corrective slide.
The USD/CAD pair continued losing ground through the early European session and tumbled to daily lows, closer to the 1.4200 mark in the last hour.
The pair extended its previous day’s intraday retracement slide from multi-year tops and witnessed some aggressive long-unwinding trade on the last trading day of the week amid a combination of negative factors.
Efforts by central banks across the world helped ease market concerns about tightening liquidity and prompted some US dollar profit-taking slide, all against the backdrop of extremely overbought conditions.
This coupled with some strong follow-through recovery in crude oil prices underpinned demand for the commodity-linked currency – the loonie and further contributed to the pair’s heavily offered tone on Friday.
In fact, WTI crude oil added the overnight strong recovery gains of around 20% from 18-year lows and rose over 6% on Friday after the US President Donald Trump hinted that he was prepared to intervene in the market.
However, concerns that the economic fallout from the coronavirus pandemic would continue to drag down demand and lead to a global supply glut might keep a lid on any further gains for oil prices, at least for now.
Hence, it will be prudent to wait for some strong follow-through selling before confirming that the pair might have already topped out in the near-term and positioning for an extension of the ongoing corrective slide.
Technical levels to watch
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