- A combination of factors assisted USD/CAD to reverse an early dip to the 1.3200 neighbourhood.
- A modest pullback in oil prices undermined the loonie and prompted some short-covering move.
- A turnaround in the risk sentiment drove haven flows towards the USD and remained supportive.
The USD/CAD pair rallied around 35-40 pips from the early European session lows and climbed to fresh daily tops, near the 1.3240-45 region in the last hour.
Having shown some resilience below the 1.3200 mark on Thursday, the pair managed to attract some dip-buying on the last day of the week and for now, seems to have snapped four consecutive days of losing streak. A weaker tone surrounding crude oil prices undermined the commodity-linked currency – the loonie – and was seen as one of the key factors behind the USD/CAD pair’s short-covering bounce.
The uptick got an additional boost from a modest intraday rebound seen around the US dollar. Emerging signs of the US economic recovery partly offset the uncertainty over the next round of the US fiscal stimulus measures. Adding to this, a turnaround in the global risk sentiment – as depicted by a sharp fall in the equity markets – further drove some heaven flows towards the greenback.
The USD/CAD pair has now recovered the previous day’s negative move to near six-month lows. However, it will be prudent to wait for some strong follow-through buying before confirming that the pair might have bottomed out in the near-term and positioning for any further positive move. Investors now look forward to the US macroeconomic data for some short-term trading impetus.
Friday’s US economic docket highlights the release of monthly Retail Sales and Michigan Consumer Sentiment Index for August. The data might influence the USD price dynamics and produce some meaningful opportunities later during the early North American session. The key focus, however, will be on a crucial weekend meeting between the US and Chinese trade officials.
Technical levels to watch
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