USD/CAD climbs further beyond 1.2700, two-week high ahead of US CPI/Canadian jobs data

• USD/CAD scaled higher for the third straight day and shot to a fresh two-week high on Friday.
• Softer oil prices undermined the loonie and extended support, despite subdued USD demand.
• Traders await the US CPI report and Canadian monthly jobs data for a fresh directional impetus.

The USD/CAD pair built on the previous day's strong move-up and gained some follow-through traction for the third successive day on Friday. The momentum lifted spot prices to a fresh two-week high, around the 1.2720-1.2725 region during the first half of the European session.

The new mini-lockdown in Shanghai - China’s biggest city and a global financial hub - renewed worries about fuel demand and dragged crude oil prices away from a three-month high touched on Wednesday. This, in turn, undermined the commodity-linked loonie and was seen as a key factor that assisted the USD/CAD pair to prolong this week's goodish rebound from its lowest level since April 21.

On the other hand, the US dollar was seen consolidating near a three-week top and failed to provide any meaningful impetus to the USD/CAD pair. That said, elevated US Treasury bond yields, along with the prevalent cautious market mood, acted as a tailwind for the safe-haven buck. The yield on the benchmark 10-year US government bond held steady above 3.0% amid hawkish Fed expectations.

Investors remain concerned that the global supply chain disruption caused by the Russia-Ukraine war and COVID-19 restriction in China would push consumer prices even higher. This might force the US central bank to tighten its monetary policy at a faster pace, which remained supportive of the recent runup in the US bond yields. Hence, the focus will remain on the US consumer inflation figures.

The crucial US CPI report should play a key role in determining the Fed's policy tightening path and influence the near-term USD price dynamics. Investors will also take cues from the simultaneous release of the monthly Canadian employment details later during the early North American session. Apart from this, oil price dynamics would provide a fresh directional impetus to the USD/CAD pair.

Technical levels to watch