USD/CAD climbs beyond 1.4200 mark, rallying oil prices likely to cap gains ahead of NFP

• USD/CAD edged higher on Friday amid sustained buying around the USD.
• A strong rally in oil prices underpinned the loonie and capped further gains.
• Friday’s key focus will remain on the closely watched US monthly jobs data.

The USD/CAD pair edged higher through the early European session and is currently placed near the top end of its daily trading range, around the 1.4220 region. 

Following the previous session's good two-way price swings, the pair managed to regain some positive traction on the last trading day of the week and was being supported by some follow-through US dollar buying.

The USD remained well supported by its status as the global reserve currency amid concerns over the economic fallout from the coronavirus pandemic, which was further illustrated by an unprecedented surge in the US weekly jobless claims.

The positive factor, to some extent, was negated by some strong follow-through gains in crude oil prices, which underpinned demand for the commodity-linked currency – the loonie – and kept a lid on any runaway rally, at least for now.

Oil adding to the overnight gains and rallied another 6% on Friday on reports that the OPEC and non-OPEC producers (OPEC+) are likely to debate oil output cuts of 10 million bpd when they gather over an emergency meeting next Monday.

The combination of diverging forces led to a subdued/range-bound price action and warrant some caution before placing any aggressive bets for the pair's next leg of a directional move ahead of the release of the US monthly jobs report (NFP).

Technical levels to watch