The USD/CAD pair gains traction for the third successive day on Friday, also marking the fifth day of a positive move in the previous six, and touches a nearly two-week high, around the 1.3535 region during the first half of the European session.
Crude Oil prices languish near the monthly low amid worries that a deeper global economic downturn will dent fuel demand and undermines the commodity-linked Loonie. Apart from this, signs of cooling consumer inflation in Canada undermine the Canadian Dollar and assist the USD/CAD pair to build on its recent bounce from the 1.3300 mark, or a two-month low touched last Friday. This, along with the emergence of fresh US Dollar (USD) buying acts as a tailwind for the major.
In fact, the USD Index, which tracks the Greenback against a basket of currencies, climbs back closer to the weekly high amid growing acceptance of further policy tightening by the Federal Reserve (Fed). In fact, the markets seem convinced that the US central bank will hike rates by 25 bps in May and have been pricing in a small chance of another rate hike in June. This, along with a generally weaker tone around the equity markets, further benefits the Greenback's safe-haven status.
Friday's follow-through move-up could further be attributed to some technical buying above the 1.3500 psychological mark. This, along with the aforementioned fundamental backdrop suggests that the path of least resistance for the USD/CAD pair is to the upside. Traders now look to the flash US PMI prints, which along with 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 major.
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