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- USD/CAD scales higher for the third straight day on Friday amid a broadly stronger USD.
- The Fed’s hawkish pause and easing US recession fears continue to boost the Greenback.
- Subdued Oil prices do little to lend support to the Loonie ahead of the Canadian jobs data.
The USD/CAD pair is seen building on this week’s recovery from the year-to-date low, around mid-1.3700s, and gaining positive traction for the third successive day on Friday. The momentum lifts spot prices close to the 1.3940-1.3945 region, or over a three-week high during the Asian session, and is sponsored by a modest US Dollar (USD) strength.
In fact, the USD Index (DXY), which tracks the Greenback against a basket of currencies, advances to a nearly one-month top in the wake of the Federal Reserve’s (Fed) hawkish pause on Wednesday. Adding to this, the US-UK trade deal helps ease concerns that an all-out trade war could trigger a US recession and further acts as a tailwind for the buck ahead of the crucial US-China tariff negotiations in Switzerland over the weekend.
Meanwhile, Crude Oil prices struggle to capitalize on the previous day’s strong move up to over a one-week high and trade with a mild negative bias. This undermines the commodity-linked Loonie and provides an additional boost to the USD/CAD pair. The move higher could also be attributed to some technical buying following the previous day’s breakout through a multi-week-old trading range hurdle near the 1.3900 round-figure mark.
However, hopes for a US-Canada trade deal might hold back traders from placing aggressive bearish bets around the Canadian Dollar (CAD) and cap the upside for the USD/CAD pair. In fact, US Commerce Secretary Howard Lutnick said on Thursday that Washington will roll out dozens of trade deals over the next month. Nevertheless, spot prices seem to have formed a near-term bottom and remain on track to register strong weekly gains.
Traders now look forward to the release of the monthly Canadian employment details, which, along with Oil price dynamics, would drive the CAD. Apart from this, speeches from a slew of influential FOMC members should contribute to producing short-term trading opportunities around the USD/CAD pair.
