USD/CAD sits near multi-week top, above mid-1.3300s as traders await US/Canadian jobs data

• USD/CAD consolidates its recent strong gains to the highest level since June 13.
• Bullish Oil prices underpins the Loonie and caps the upside amid a softer USD.
• Bets for more Fed rate hikes act as a tailwind ahead of US/Canadian jobs data.

The USD/CAD pair enters a bullish consolidation phase and oscillates in a narrow range, just below its highest level since June 13 touched during the Asian session on Friday. Spot prices currently hovers around the 1.3360-1.3365 region, nearly unchanged for the day, as traders keenly await the release of the crucial monthly employment details from the US and Canada.

The Canadian jobs data, however, is more likely to be overshadowed by the closely-watched US NFP report, which could influence the Federal Reserve's (Fed) policy outlook and drive the US Dollar (USD) demand. In the meantime, the uncertainty over the Fed's future rate-hike path keeps the USD bulls on the defensive. Apart from this, the recent bullish run in Crude Oil prices is seen underpinning the commodity-linked Loonie and acting as a headwind for the USD/CAD pair.

The minutes from the June FOMC meeting released on Wednesday revealed that almost all members supported resuming rate hikes as inflation remains unacceptably high. Moreover, Thursday's upbeat US ADP report and the ISM Services PMI reaffirmed bets for a 25 bps lift-off at the July FOMC meeting. That said, the Prices Paid sub-component of the ISM survey fell to a more than two-year low and fueled speculations that the Fed will soften its hawkish stance sooner rather than later.

Crude Oil prices, meanwhile, hold steady near a two-week high touched on Thursday and remain well supported by a larger-than-expected fall in US inventories last week, which pointed to strong refining demand. This comes on after top Oil exporters - Saudi Arabia and Russia - announced a fresh round of output cuts for August and continues to act as a tailwind for the black liquid. That said, worries about a deeper global economic downturn, particularly in China, might cap gains.

Furthermore, the prospects for more interest rate hikes by the Fed remain supportive of elevated US Treasury bond yields, which is seen acting as tailwind for the USD and should lend some support to the USD/CAD pair. In fact, the yield on the two-year US government bond, which typically moves in step with interest rate expectations, is placed near its highest since June 2007, while the benchmark 10-year US Treasury yield is holding steady above the 4.0% threshold.

Nevertheless, the USD/CAD pair remains on track to end in the green for the second successive week and the aforementioned fundamental backdrop favours the USD bulls. That said, it will still be prudent to wait for some follow-through buying before traders start positioning for an extension of the recent strong recovery from the 1.3115 region, or the lowest level since September 2022 touhced last Tuesday.

Technical levels to watch