USD/CAD pulls away from 5-week highs, looks to close week above 1.32

• Crude oil recovery helps Loonie recover its losses on Friday.
• US Dollar Index edges lower toward 98 after NFP data.
• USD/CAD remains on track to close third straight week higher.

The USD/CAD pair rose to its highest level since June 20 at 1.3266 earlier today but failed to preserve its bullish momentum in the second half of the day. As of writing, the pair was trading at 1.3223, adding 0.1% on a daily basis. Despite that pullback, however, the pair remains on track to post gains for the third straight week.  

Crude oil hit by tariff announcement

Concerns over the negative impact of Trump administration’s new tariffs on $300 billion worth of Chinese imports on the global economy and the oil demand weighed on crude oil prices. With the barrel of West Texas Intermediate slumping to its lowest level in six weeks below $54, the commodity-sensitive Loonie came under pressure and failed to capitalize on the broad-based USD weakness. However, the WTI’s technical correction today helped the currency show some resilience. As we approach the end of the week, the WTI is trading at $55.70, up 2.3% on the day.  

Dollar weakens on rate cut expectations

On the other hand, the sharp fall witnessed in the US Treasury bond yields and the rising probability of the Fed opting out for another 25 basis points rate cut in September following the tariff announcement forced the US Dollar Index to retrace this week’s rally. At the moment, the US Dollar Index is virtually unchanged on the week a little above the 98 mark.  

Earlier today, the data published by the US Bureau of Labor Statistics showed that the unemployment in the US remained unchanged at 3.7% as expected and the Nonfarm Payrolls came in at +164,000 to match the market consensus.  

In the meantime, Statistics Canada reported that the trade surplus in June narrowed to $14 million but still bettered analysts’ estimate for a deficit of $30 million.

Technical levels to watch for