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USD/CAD retreated further from multi-week highs and was pressured by a combination of factors.
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Rebounding crude oil prices underpin the loonie and prompt some selling amid a weaker USD.
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Intraday USD selling accelerated after the release of mixed US monthly jobs data.
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Hawkish Fed expectations, recession fears to limit the USD losses and lend support to the pair.
The USD/CAD pair extends its steady intraday descent and drops to the 1.3115-1.3110 area, or a fresh daily low during the early North American session. Spot prices retreat further from the highest level since July 14 touched the previous day and for now, seem to have snapped a three-day winning streak.
A good recovery in crude oil prices underpins the commodity-linked loonie This, along with a broad-based US dollar weakness, prompted some selling around the USD/CAD pair on Friday. The USD retracement slide from a two-decade high set on Thursday accelerated after the release of a mixed US monthly jobs report. In addition, an intraday decline in US Treasury bond yields and risk-on momentum exerted additional downward pressure on the safe-haven greenback.
That said, a combination of factors should help limit deep losses for the USD/CAD pair and take some caution before placing aggressive bearish bets. Investors worry that a deep global economic slowdown and fresh COVID-19 lockdowns will dampen demand for the fuel, acting as a headwind for crude oil prices. Beyond that, expectations that the Fed will stick to its aggressive policy tightening path will limit USD declines and support the major.
In fact, the markets are still pricing in a greater chance of a supersized 75 bps rate hike move at the next FOMC monetary policy meeting on September 20-21. This, in turn, favours the USD bulls and supports prospects for the emergence of some dip-buying around the USD/CAD pair. Hence, it will be prudent to wait for a strong follow-through decline before confirming that the recent strong move up witnessed over the past three weeks or so has run out of steam and positioning for further losses.
Technical levels to watch
USD/CAD
