USD/CAD clings to gains near 1.4000, looks to close second straight day higher

The USD/CAD pair rose to its highest level since Monday at 1.4050 on Friday but started to retrace its rally in the late American session. As of writi  |  22/05/2020 18:34
  • USD/CAD pulls away from four-day highs, stays above 1.4000.
  • Modest rebound seen in crude oil prices helps commodity-related CAD find demand.
  • US Dollar Index rises on risk aversion on Friday.

The USD/CAD pair rose to its highest level since Monday at 1.4050 on Friday but started to retrace its rally in the late American session. As of writing, the pair was up 0.41% on a daily basis at 1.4010. Despite the recovery USD/CAD was able to stage on Thursday and Friday, it remains on track to close the week in the negative territory.

Retail Sales in Canada fell sharply in March

Earlier in the day, the data published by Statistics Canada revealed that Retail Sales declined by 10% on a monthly basis in March. However, this reading came in line with market expectation and helped the CAD limit its losses. Additionally, Retail Sales Excluding Autos only decreased by 0.4% in the same period and beat analysts' estimate for a fall of 5% by a wide margin.

Meanwhile, heightened US-China tensions weighed on market sentiment on Friday and caused risk-sensitive crude oil prices to push lower. After climbing to its highest level in more than two months at $34.65 on Thursday, the barrel of West Texas Intermediate dropped all the way to $30.70 on Friday. 

However, after the weekly Baker Hughes data showed that the total number of active oil rigs in the US fell to a record low of 237, the WTI extended its rebound and allowed the CAD show resilience against the USD. At the moment, the WTI is still down 2.35% on the day at $33.10.

On the other hand, the greenback capitalized on risk-off flows on Friday. The US Dollar Index, which slumped to 99 on Thursday, was last up 0.42% on the day at 99.84. 

On Monday, the US markets will be closed due to the Memorial Day holiday. Later in the day, Bank of Canada Governor Stephen Poloz will be delivering a speech at 1730 GMT.

Technical levels to watch for

 

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