USD/CAD clings modest recovery gains, just below mid-1.3400s
- USD/CAD gains some positive traction on Friday and moves away from six-week lows.
- A mildly softer tone around oil prices undermined the loonie and remained supportive.
- A subdued USD price action did little to impress bulls or provide any additional boost.
The USD/CAD pair gained some positive traction through the early European session and shot to fresh daily tops, around the 1.3445 region in the last hour.
Following an early dip to the 1.3375 region, the pair caught some fresh bids and was now seen building on the previous day's goodish intraday bounce of over 50 pips from six-week lows. The uptick was exclusively sponsored by a weaker tone surrounding crude oil prices, which undermined demand for the commodity-linked currency – the loonie.
Oil prices slipped amid concerns about worsening US-China relations, especially after the US abruptly ordered China to close its consulate Houston by Friday. This comes amid growing worries that the second wave of coronavirus cases could delay the US economic recovery, which might eventually dampen prospects for a pickup in the fuel demand.
Meanwhile, the US dollar struggled to attract any haven flows despite the prevalent risk-off mood, instead was pressured by a fresh leg down in the US Treasury bond yields. This, in turn, might hold investors from placing any aggressive bullish bets and keep a lid on any runaway rally for the USD/CAD pair, at least for the time being.
Hence, it will be prudent to wait for some strong follow-through buying before confirming that the pair might have already bottomed out in the near-term. That said, any subsequent positive move is likely to confront a stiff resistance, rather remain capped near an important horizontal support breakpoint, around the key 1.3500 psychological mark.
Market participants now look forward to the US economic docket, highlighting the release of the flash version of PMI prints for July. This, along with the broader market risk sentiment will play a key role in influencing the USD/CAD pair's momentum and assist traders to grab some meaningful opportunities on the last day of the week.
Technical levels to watch