• Investors bet that commodity producing economies will take up the slack left by disruptions to Russia’s exports.
• The carnage in the oil prices has not impacted much on the loonie.
• Hopes of strong employment data from Canada underpins the CAD bulls.

The Canadian dollar strengthened against its U.S. counterpart on Friday as market now bet that commodity producing economies will take up the slack left by disruptions to Russia’s exports.

Marc Chandler, chief market strategist at Bannockburn Global Forex LLC. said “Many people see the commodity story as a key driver right now.”

The Canadian dollar gained strength despite of the fall in crude oil. The WTI crude oil prices dropped during the last three days, and reached to the biggest weekly loss of $105.80 on the previous day and this is so far biggest loss, since November 2021. The oil’s latest losses could be related to the global producers’ readiness, including Russia’s, to adhere to output commitments and ease the strain on supplies caused due to geopolitical factors.

Meanwhile, hopes of a strong monthly employment report from Canada also favored the CAD bulls to ignore the recently softer prices of the nation’s key export item and fall of WTI crude oil. The headlines Net Employment Change is likely to reverse the previous -200.1K figures with 160K while the Unemployment Rate is expected to ease from 6.5% to 6.2%.

The Bank of Canada raised interest rates last week for the first time in three years. And now Jobs data can boost expectation for further tightening next month.

On the geopolitical front, a total disappointment from negotiations recently joined news that Russian forces attacked Kharkiv institute that contains an experimental nuclear reactor to weigh on the sentiment. Moreover, the ECB’s faster tapering announcement, as well as a fresh 40-year high of the US headline inflation data were additional strains on the market sentiment.

USD/CAD 4 Hour Chart:

Support: 1.2729 (S1), 1.2694 (S2), 1.2638 (S3).

Resistance: 1.2820 (R1), 1.2876 (R2), 1.2911 (R3).

Moving on, the headlines from the Russia-Ukraine tussle will have a significant impact on the pair. Market will also focus on Michigan Consumer Sentiment Index and Canada Employment data, which is due on Friday. In the meantime, we expect a bearish trend for USD/CAD.