USD/CAD jumps to two-year highs above 1.3550 after disappointing Canada data

• USD/CAD continues to trade in positive territory above 1.3500 on Friday.
• The data from Canada showed that Retail Sales declined sharply in July.
• The dollar preserves its strength amid risk aversion ahead of the weekend.

The USD/CAD pair retreated toward 1.3500 during the European trading hours but managed to gather bullish momentum in the second half of the day. As of writing, the pair was up 0.6% on the day at 1.3565, on track to its highest weekly close since June 2020.

The broad-based dollar strength on Friday helped USD/CAD gain traction. Boosted by safe-haven flows, the US Dollar Index, which tracks the dollar's performance against a basket of six major currencies, climbed above 112.00 for the first time in two decades. With Wall Street's main indexes losing more than 1% after the opening bell, the greenback continues to outperform its rivals and not allowing USD/CAD to stage a downward correction.

Meanwhile, the data published by Statistics Canada revealed that Retail Sales contracted by 2.5% on a monthly basis in July, compared to the market expectation for a decline of 2%. On top of the disappointing data from Canada, crude oil prices are down more than 5% on the day, further weighing on the commodity-sensitive loonie.

Disappointing PMI data from the euro area and the UK earlier in the day revived concerns over a global economic slowdown, causing investors to price in a worsening energy demand outlook. At the time of press, the barrel of West Texas Intermediate was trading at its lowest level since January near $79.

Market participants now await S&P Global's preliminary September Manufacturing and Services PMI data for the US.

Technical levels to watch for