USD/CAD clings to gains near session tops, around mid-1.2300s
- USD/CAD caught some fresh bids on Monday and recovered a part of the post-NFP losses.
- A softer tone around crude oil prices undermined the loonie and provided a modest lift.
- A subdued USD price action held bulls from placing aggressive bets and capped the upside.
The USD/CAD pair held on to its modest intraday gains through the first half of the European session, albeit lacked any follow-through and remained below mid-1.2300s.
The pair managed to regain some positive traction on the first day of a new trading week and recovered a part of Friday's losses led by a mixed US monthly jobs report. A softer tone surrounding crude oil prices undermined the commodity-linked loonie and extended some support to the USD/CAD pair. That said, a subdued US dollar price action held bulls from placing aggressive bets and capped the upside, at least for now.
The United Arab Emirates continues to block an OPEC+ agreement to increase production by about 2 million barrels a day from August to December 2021 and to extend the remaining output cuts to the end of 2022. The development acted as a headwind for the black gold ahead of the next OPEC+ meeting scheduled on Monday. This, in turn, was seen as one of the key factors that provided a modest lift to the USD/CAD pair.
Meanwhile, an unexpected rise in the US unemployment rate to 5.9% largely offset a stronger than expected headline NFP print, which showed that the US economy added 850K jobs in June. This helped ease market fears of an earlier Fed rate hike, which kept the USD bulls on the defensive and capped gains for the USD/CAD pair. Investors also seemed reluctant to place aggressive bets amid relatively thin liquidity conditions.
Hence, it will be prudent to wait for some follow-through buying before positioning for any further appreciating move. The market focus now shifts to the release of the FOMC meeting minutes, due on Wednesday. Investors will look for clues about the Fed's policy outlook, which will influence the USD in the near term. This, along with oil price dynamics, should help determine the next leg of a directional move for the USD/CAD pair.
Technical levels to watch