USD/CAD bulls attack 1.3400 amid downbeat Oil price, focus on BoC’s Macklem, Canada employment data

• USD/CAD begins the key week on a firmer footing, mildly bid during three-day uptrend.
• Upbeat US data, geopolitical tension propelled US Dollar, weighed on Oil price of late.
• BoC Governor Macklem’s speech, Canada jobs report for January will be crucial for immediate directions.

USD/CAD prints mild gains around 1.3415 as bulls keep the reins at the start of the key week for Loonie traders. In doing so, the quote prints three-day uptrend while justifying firmer US Dollar and the downbeat prices of Oil, Canada’s main export item.

Be it the unimpressive interest rate hikes by the European Central Bank (ECB) and the Bank of England (BoE) or the strong US data, the US Dollar had it all to recover from the multi-month low. That said, the US Dollar Index (DXY) managed to post the biggest weekly gains since September 2022, not to forget snapping three-week downtrend, in the last.

On Thursday, the ECB and the BoE both matched market forecasts by announcing 0.50% hike in their respective benchmark rates. The policymakers also tried to sound hawkish but couldn’t hide the receding inflation fears, which in turn suggested lesser need for strong rate increases. The same joined downbeat tech earnings reports and helped the DXY to rebound from the lowest levels since April 2022.

Following that, the US Bureau of Labor Statistics (BLS) surprised markets by revealing that the Nonfarm Payrolls (NFP) rose by 517K in January, versus 185K expected and 260K (upwardly revised) prior. It’s worth noting that the Unemployment Rate also dropped to 3.4% from 3.5% prior and 3.6% expected but the Average Hourly Earnings eased during the stated month.

Other than the headline US job numbers, the rebound in the US ISM Services PMI from 49.2 to 55.2, versus 50.4 expected, also underpinned the rebound in the United States Treasury bond yields and the US Dollar. That said, the benchmark US 10-year Treasury bond yields jumped the most since late September 2022 to regain 3.52% level by the volatile week’s end.

Additionally helping the US Dollar are the recent fears emanating from surrounding the US and China. “A US military fighter jet shot down a suspected Chinese spy balloon off the coast of South Carolina on Saturday, a week after it first entered US airspace and triggered a dramatic -- and public -- spying saga that worsened Sino-US relations,” said Reuters.

Elsewhere, WTI crude oil dropped in the last three consecutive days to $73.45 as firmer US Dollar and fresh fears surrounding the gap for the Fed doves before they retake control, due to the strong data, weigh on the commodity prices.

Moving on, Tuesday becomes the key day for the USD/CAD pair as Bank of Canada (BoC) Governor Tiff Macklem and Federal Reserve (Fed) Chairman Jerome Powell both will appear for speeches. Following that, Friday’s Canada jobs report for January and the US UoM Consumer Sentiment Index for February, as well as the University of Michigan's 5-year Consumer Inflation expectations, will be crucial for fresh impulse.

Technical analysis

Although an upward-sloping support line from June 2022, around 1.3310 by the press time, defends USD/CAD buyers, the Loonie pair’s upside remains elusive until the quote stays below the 50-DMA level of near 1.3500.