USD/CAD sticks to gains near multi-day top, above 1.3800 ahead of Canadian Retail Sales

• A combination of supporting factors pushes USD/CAD to a multi-day high on Friday.
• Softer oil prices weigh on the loonie and offer support amid resurgent USD demand.
• Investors now look to Canadian Retail Sales data for short-term trading opportunities.

The USD/CAD pair builds on the overnight late rebound from the 1.3650 area, or a two-week low and gains strong follow-through traction on Friday. The intraday buying remains unabated through the first half of the European session and lifts spot prices to a four-day peak, around the 1.3830 region.

A fresh leg down in crude oil prices undermines the commodity-linked loonie and turns out to be a key factor acting as a tailwind for the USD/CAD pair. In fact, the black liquid remains well within the striking distance of the weekly low amid concerns that a deeper global economic downturn will hurt fuel demand.

Apart from this, a goodish pickup in the US dollar demand provides an additional lift to the USD/CAD pair and supports prospects for additional gains. The overnight hawkish remarks by Philadelphia Fed President Patrick Harker bets for another supersized rate hike in November and lifts the USD to over a one-week high.

Harker warned that the US central bank is actively trying to slow the economy to combat inflation and added fuel to the recent rally in the US Treasury bond yields. In fact, the yield on the benchmark 10-year US government bond rallies to its highest level since 2008, which, in turn, is seen lending support to the buck.

Investors also seem worried that rapidly rising borrowing costs will eventually trigger a recession in the world’s largest economy. Adding to this, the protracted Russia-Ukraine war and China's strict zero-COVID policy take a toll on the global risk sentiment and further benefits the greenback's relative safe-haven status.

There isn't any major market-moving macro data due for release from the US, leaving the greenback at the mercy of the US bond yields and the broader risk sentiment. The Canadian economic docket features monthly Retail Sales figures. This, along with oil price dynamics, should provide some impetus to the USD/CAD pair.

Technical levels to watch