THE USD/CAD pair finds some support near the 1.3700 mark on Friday and stalls the overnight retracement slide from the 1.3975-1.3980 region, or the highest level since May 2020. The pair climbs back closer to the daily peak and trades around mid-1.3700s during the early European session.
The US dollar attracts some dip-buying on the last day of the week, which turns out to be a key factor offering support to the USD/CAD pair.
A dramatic turnaround in the global risk sentiment might keep a lid on any meaningful gains for the safe-haven buck and the USD/CAD pair. At least for the time being. Meanwhile, the downside seems cushioned amid subdued action around crude oil prices, which could undermine the commodity-linked loonie. Nevertheless, the fundamental backdrop still seems tilted firmly in favour of bullish traders.
Investors remain concerned about the potential economic fallout from rapidly rising borrowing costs, geopolitical risks and a resurgence of COVID-19 cases in China. This should continue to benefit the greenback’s safe-haven status. Furthermore, worries that a deeper global economic downturn and fresh COVID-related lockdowns in China will dent fuel demand, which, in turn, could weigh on crude oil prices.
The aforementioned factors suggest that the path of least resistance for the USD/CAD pair is to the upside. A convincing break below the 1.3700 round figure might negate the positive outlook and prompt aggressive technical selling.
Market participants now look forward to the US economic docket, featuring the release of monthly Retail Sales figures, the Prelim Michigan Consumer Sentiment and Inflation Expectations Index. This, along with the US bond yields and speeches by influential FOMC members, will drive the USD demand. Apart from this, oil price dynamics could produce short-term trading opportunities around the USD/CAD pair.
