USD/CAD edged lower during Friday’s Asian session, breaking below the 1.4100 handle and halting a two-day advance that pushed the pair to its highest level in nearly two weeks. Even with the intraday dip, the pair is still set for strong weekly gains as bullish sentiment toward the US Dollar (USD) remains firmly in place.
The USD Index (DXY) climbed to its strongest level since late May on Thursday, supported by fading expectations for additional Fed rate cuts. The repricing gained traction after the delayed US NFP report showed the economy added 119,000 jobs in September – well above the 50,000 expected – reversing August’s revised decline of 4,000 jobs. The data eased worries about labor-market softness, offsetting a modest rise in the unemployment rate to 4.4% from 4.3%.
Oil weakness limits CAD recovery
USD bulls are taking a breather ahead of the weekend as concerns grow over slowing US economic momentum following the largest government shutdown on record. Meanwhile, the Canadian Dollar (CAD) remains pressured by earlier domestic data indicating easing inflation trends. Persistent selling in crude oil—Canada’s key export—continues to weigh on the Loonie and helps limit the downside in USD/CAD, keeping bearish follow-through in check.
Market focus turns to CAD retail sales and US PMIs
Traders now await Canada’s monthly retail sales figures and the flash US PMI readings for fresh direction during the North American session.
A series of speeches from influential FOMC policymakers will also be closely monitored for signals on the Fed’s rate-cut trajectory, shaping USD sentiment into the weekend. Combined with oil price movements, these factors are likely to generate short-term opportunities in USD/CAD. For now, the pair remains on track to end the week with solid gains, trading not far from its multi-month highs.
