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USD/CAD regains some positive traction on Friday amid a modest pickup in the USD demand.
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Thursday’s upbeat US macro data fueled expectations of a hawkish Fed and benefited the greenback.
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Bullish Crude Oil prices continue to underpin the Loonie and keep a lid on any further gains.
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Traders are now looking to the US PCE report for a fresh stimulus ahead of next week’s FOMC meeting.
The USD/CAD pair attracts some buyers on Friday and reverses a part of the previous day’s slide to the 1.3300 mark, or its lowest level since November 17. The pair sticks to its intraday gains through the early European session and is currently placed near the daily top, just below mid-1.3300s.
The US dollar received support from mostly upbeat US macro data released on Thursday and ended the week higher, which in turn, is acting as a tailwind for the USD/CAD pair. In fact, the US Commerce Department reported that the economy expanded at a 2.9% annual pace in the fourth quarter, against consensus estimates for a 2.6% reading. Stronger-than-expected growth figures could allow the Fed to maintain its dovish stance for longer. This pushes US Treasury bond yields higher and benefits the greenback.
The markets, however, still seem convinced that the Fed will slow the pace of its policy-tightening and deliver a smaller 25 bps rate hike in February. This holds back the USD bulls from placing aggressive bets. Apart from this, the underlying bullish sentiment surrounding Crude Oil prices is underpinning the commodity-linked Loonie. The aforementioned factors should contribute to capping any meaningful upside for the USD/CAD pair. Traders might also prefer to wait for the release of the US Core PCE Price Index, due later during the early North American session.
The key focus, however, will remain glued to the outcome of the highly-anticipated two-day FOMC policy meeting, scheduled to be announced next week. In the meantime, the US bond yields and the broader risk sentiment will drive the USD demand. Apart from this, Oil price dynamics should provide some impetus to the USD/CAD pair and assist traders to grab short-term opportunities.
Technical levels to watch
USD/CAD
