- USD/CAD retraces daily gains on USD sell-off.
- Crude oil extends its rally for the fourth straight day on Friday.
- The pair is down nearly 100 pips on the week.
The USD/CAD pair, which staged a modest recovery and rose towards mid-1.27s on Friday, reversed course in the last hour and dropped to a fresh daily low at 1.2702. As of writing, the pair was trading at 1.2710, virtually unchanged on the day.
The pair's recent drop seems to be the product of a broad-based selling pressure witnessed on the greenback. Despite a lack of fresh catalysts, investors continue to ride the selling-wave that came with the release of the FOMC's November meeting minutes on Wednesday. The US Dollar Index, which started the week slightly below the 94 handle, recently broke below the 93 mark and renewed its 6-week low at 92.74. At the moment, the DXY is at 92.76, down 0.3% on the day.
On the other hand, the commodity-sensitive loonie is finding some additional demand from the markets as crude oil prices continue to rise on heightened expectations of OPEC/non-OPEC output cut deal getting extended next week in Vienna. The barrel of West Texas Intermediate is now trading at its highest level since June of 2015 at $58.70, up 1.3% on a daily basis.
Later in the session, the greenback is likely to try to recover its recent losses against its peers is the Markit PMI data points to healthy business activity in the manufacturing and the service sectors. However, the correction could stay limited amid thin trading volume.
Technical outlook
The initial hurdle for the pair aligns at 1.2750 (daily high/20-DMA) ahead of 1.2835 (Nov. 21 high) and 1.2915 (Oct. 31 high). On the downside, supports are located at 1.2650 (50-DMA), 1.2560 (100-DMA) and 1.2500 (psychological level).
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