USD/CAD consolidates gains above 1.26, heads for first positive weekly close since June

After rising to its highest level since June 18 at 1.2667 in the first half of the NA session, the USD/CAD started to consolidate its daily earnings and is now trading at 1.2647, up 0.55%, or 70 pips, on the day.

Today's upbeat employment data from the United States stole the spotlight and the Canada data was largely ignored by the participants, allowing the pair to gather a strong bullish momentum. The nonfarm payroll growth from the U.S. came in at 209K, beating the market expectation of 183K while the unemployment rate eased to 4.3% in July from 4.4% in June. On the other hand, the unemployment rate in Canada dropped to 6.3% in July from 6.5% in June with the net employment rising by 10.9K. With this late upsurge, the US Dollar Index is looking to close the week higher after falling for three straight weeks. At the moment, the index is at 93.50, up 0.85% on the day.

• US: Total nonfarm payroll employment increased by 209,000 in July
• Canada: Following two months of notable increases, employment was little changed in July

However, crude oil prices, which have been significantly impacting the demand for the commodity-sensitive loonie, are recovering their losses on Friday with the barrel of West Texas Intermediate gaining $0.40 at $49.40, and limiting the gains of the pair towards the end of the week.

Nevertheless, after plummeting to its lowest level in more than a year last week, the USD/CAD pair is looking to close the week around 200 pips higher. With no more data left, the pair is likely to remain around its recent peaks.

Technical outlook

The pair could encounter the first technical hurdle at 1.2670 (daily high) ahead of 1.2700 (psychological level/Jul. 17 high) and 1.2770 (Jul. 13 high). On the downside, supports are located at 1.2555 (daily low), 1.2520 (10-DMA) and 1.2450 (Aug. 1 low). Despite this week's solid performance, the RSI on the daily graph is nowhere near the overbought territory as it's moving near the 50 handle, suggesting that the pair is likely to sustain its bullish momentum.