USD/CAD failed to capitalize on the overnight solid rebound or find acceptance above the 1.2500 mark. Retreating US bond yields weighed on the US; a modest recovery in oil prices underpinned the loonie. Investors now look forward to the release of Canadian monthly Retail Sales for a fresh trading impetus.
The USD/CAD pair extended its steady intraday descent and refreshed daily lows, around the 1.2460 region during the early part of the European session.
A combination of factors failed to assist the pair to build on the previous session's solid rebound from multi-year lows, rather prompted some selling on the last trading day of the week. Following an overnight sell-off, some stability in the oil market extended some support to the commodity-linked currency. Apart from this, a modest pullback in the US Treasury bond yields undermined the US dollar and further contributed to the offered tone surrounding the USD/CAD pair.
Oil prices tumbled over 7% on Thursday amid worries that a new wave of COVID-19 infections in Europe and pandemic-related lockdown could hinder a recovery in fuel demand. However, Thursday's announcement that European nations plan to resume AstraZeneca’s COVID-19 vaccine helped ease those concerns. This, coupled with the optimism led by a surprise decision by OPEC+ to extend supply curbs, extended some support and pushed WTI futures back closer to the $61.00/barrel mark.
Meanwhile, the yield on the benchmark 10-year US government bond retreated from over one-year tops set on Thursday, which, in turn, kept the USD bulls on the defensive. The calmer tone in the fixed income market provided a modest lift to the global risk sentiment and further dented the greenback's relative safe-haven status. That said, the optimistic outlook for the US economy should continue to underpin the USD and help limit any meaningful slide for the USD/CAD pair.
From a technical perspective, the pair's inability to capitalize on the attempted recovery move suggests that the near-term downtrend might still be far from being over. Hence, it will be prudent to wait for a sustained strength beyond the 1.2500 mark and some follow-through buying beyond the overnight swing highs, around the 1.2525 region before confirming that the USD/CAD pair has bottomed out. This will set the stage for a further near-term appreciating move.
There isn't any major market-moving data due for release from the US, leaving the USD at the mercy of the US bond yields and the broader market risk sentiment. The Canadian economic docket highlights the release of monthly Retail Sales figures. This, along with oil price dynamics, will influence the Canadian dollar and produce some trading opportunities around the USD/CAD pair.