The USD/CAD pair extended its recovery for the third consecutive session on Friday, climbing to a three-week high near the 1.3940–1.3945 zone during the Asian session. This fresh upside is underpinned by sustained U.S. Dollar (USD) strength, technical momentum, and a subdued Canadian Dollar (CAD) amid softer crude oil prices.
The U.S. Dollar Index (DXY) pushed toward a one-month high following the Federal Reserve’s hawkish policy hold earlier this week, reinforcing market expectations that rate cuts may not be imminent. Adding to the USD’s bullish tone, progress in U.S.-UK trade negotiations has tempered fears of a global trade war and boosted investor confidence in the U.S. economy. Attention now turns to this weekend’s critical U.S.-China tariff discussions in Switzerland, which could further influence risk sentiment and currency flows.
Meanwhile, crude oil prices—closely correlated with the CAD—edged lower after a strong rebound on Thursday, denting the appeal of the commodity-linked Canadian currency. This, combined with a technical breakout above the 1.3900 resistance zone, added to the bullish momentum in USD/CAD.
Still, optimism around a potential U.S.-Canada trade deal could act as a counterbalance, limiting the pair’s upside. U.S. Commerce Secretary Howard Lutnick stated Thursday that Washington is preparing to announce numerous trade agreements in the coming month, which may include a revised framework with Ottawa.
Outlook and Key Events:
While USD/CAD appears to have carved out a short-term bottom, near-term direction may hinge on the release of Canada’s monthly employment report later today. Oil market dynamics and a slew of upcoming speeches from Federal Open Market Committee (FOMC) members will also be closely monitored for trading cues.
Technical Snapshot:
Immediate resistance: 1.3945, followed by the psychological 1.4000 level
Support levels: 1.3900 (breakout zone), 1.3840, and 1.3775 (week’s low)
Bias: Bullish, with room for extension if Canadian jobs data disappoints or oil remains weak
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