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  • USD/CAD seemed struggling to register any meaningful recovery.
  • Rallying oil prices underpinned the loonie and capped the upside.
  • Risk-off mood benefitted the USD and helped limit deeper losses.

The USD/CAD pair consolidated its recent fall to near 14-month lows and was seen oscillating in a narrow trading band, just below the key 1.30 psychological mark on Friday.

A combination of diverging forces failed to provide any meaningful impetus and led to the pair’s subdued trading action through the early European session on the last day of the week. A strong rally in crude oil prices underpinned the commodity-linked currency – loonie and kept a lid on the pair’s early attempted recovery move.

Downside remains cushioned

Oil prices jumped over 3% on Friday, hitting the highest level since September in reaction to the US airstrikes on Baghdad airport. Key Iranian military personnel, including Major-General Qassem Soleimani, were killed in the attack, stoking concerns that escalating geopolitical tensions in the Middle Ease may disrupt global oil supplies.

Meanwhile, heightened tensions between the US and Iran triggered a fresh wave of the global risk aversion trade. The same was evident from a selloff across equity markets, which extended some support to the greenback’s perceived safe-haven status against its Canadian counterpart and helped limit deeper losses, at least for the time being.

Moving ahead, market participants now look forward to the release of US ISM Manufacturing PMI for some short-term impetus. The focus, however, will remain on the latest FOMC monetary policy meeting minutes, which will play a key role in influencing the USD price dynamics and provide a fresh directional impetus to the major.

Technical levels to watch