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  • Sustained USD buying assisted USD/CAD to gain some positive traction on Thursday.
  • Rallying crude oil prices underpinned the loonie and kept a lid on any further gains.

The USD/CAD pair was seen hovering near daily tops during the early European session, with bulls making a fresh attempt to build on the momentum beyond the 1.2800 mark.

Following the previous day’s two-way price move, the pair managed to regain some positive traction on Thursday and was supported by sustained US dollar buying. However, the ongoing bullish run in crude oil prices underpinned the commodity-linked loonie and kept a lid on any runaway rally for the USD/CAD pair.

The US bond market reacted strongly amid signs of progress on additional US stimulus measures and pushed the yield on the benchmark 10-year government bond to near 10-month high touched in January. This, along with improving US economic data, benefitted the USD and extended some support to the USD/CAD pair.

The ADP report released on Wednesday showed that private-sector employment in the US grew 174K in January. Adding to this, the employment sub-component of the US ISM services sector report showed a significant increase in the previous month and lifted expectations for Friday’s official non-farm payrolls (NFP).

Meanwhile, expectations for a massive US government spending fueled optimism about a strong global economic recovery and in fuel demand. Oil prices climbed to the highest level in more than a year and were further supported by the fact that the OPEC+ extended its current oil output policy at a meeting on Wednesday.

This was seen as the only factor that capped the upside for the USD/CAD pair and makes it prudent to wait for some follow-through buying before positioning for any further appreciating move. Market participants now look forward to the release of the Initial Weekly Jobless Claims data from the US for a fresh impetus.

Technical levels to watch