USD/CAD fails to capitalize on early uptick, rising oil prices capping gains

   “¢   The USD remains on the defensive in wake of Friday’s softer consumer inflation figures.
   “¢   A sudden pickup in oil prices underpins Loonie and exerts some downward pressure.

The USD/CAD pair regained some positive traction at the start of a new trading week and build on Friday’s late bounce from 1-1/2 week lows, albeit lacked any strong follow-through.

The Canadian Dollar surged against its US counterpart, dragging the pair to its lowest levels since 1 May on Friday following the release of stellar Canadian jobs report for the month of April. According to Statistics Canada, the economy added 107K, surpassing consensus estimates by a huge margin, and the unemployment rate fell to 5.7% from 5.8% in March.

Adding to this, the US Dollar sunk to three-week lows in reaction to softer than expected US consumer inflation figures and further collaborated to the pair’s sharp intraday slide below the 1.3400 round figure mark, though the bearish pressure eased a bit near 50-day SMA support and prompted some late short-covering bounce on Friday.  

The recovery momentum extended through the early part of Monday’s trading session but lacked any strong bullish conviction amid a subdued USD price action. Meanwhile, the latest leg of a downtick in the past hour or so was led by a sudden pickup in Oil prices, which tends to underpin demand for the commodity-linked currency – Loonie.  

It would now be interesting to see if the pair is able to attract some buying at lower levels or the current pullback marks the resumption of last week’s rejection slide from the key 1.3500 psychological mark. In absence of any major market moving economic releases, the USD/Oil price dynamics might continue to act as key determinants of the pair’s momentum on Monday.

Technical levels to watch