USD/CAD flirts with multi-month peak, around 1.2830 ahead of US/Canadian jobs data

• USD/CAD edged higher on Friday amid a modest pickup in the USD demand.
• A further recovery in oil prices could underpin the loonie and cap the upside.
• Traders now eye US/Canadian monthly jobs reports for some opportunities.

The USD/CAD pair was seen trading near the highest level since September, with bulls still awaiting a sustained move beyond the 1.2830-35 region.

Following the previous day's modest downtick, the USD/CAD pair caught fresh bids on the last day of a new week and was supported by the emergence of some US dollar buying. Growing market acceptance that the Fed would adopt a more aggressive policy response to contain stubbornly high inflation remained supportive of the prevalent bullish sentiment surrounding the greenback.

In fact, investors started pricing in an eventual liftoff in June 2022 after Fed Chair Jerome Powell's hawkish comments during the congressional testimony earlier this week. Powell said the Fed needs to be ready to respond to the possibility that inflation may not recede in the second half of 2022. He added that the Fed is likely to speed up the tapering of its asset purchases.

However, a generally positive risk tone held back traders from placing aggressive bullish bets around the safe-haven USD. On the other hand, a further recovery in crude oil prices, from the lowest level since August 23 touched in the previous day, underpinned the commodity-linked Canadian dollar. This, in turn, could act as a headwind for the USD/CAD pair and cap the upside.

Investors might also prefer to move on the sidelines and wait for a fresh catalyst from Friday's key releases of monthly employment details from the US and Canada. The US economic docket also features the ISM Services PMI and influence the USD demand. Apart from this, traders will take cues from oil price dynamics for some short-term opportunities around the USD/CAD pair.

Technical levels to watch