During Friday’s Asian session, the USD/CAD pair staged a recovery, benefiting from the slight uptick in the US dollar (USD) and a decline in oil prices. Despite this rebound, the bearish outlook for USD/CAD persists, as the pair remains below the critical 100-day Exponential Moving Average (EMA) on the daily chart. Currently trading near 1.3230, the pair has registered a modest 0.02% gain for the day.

The drop in oil prices on Friday, driven by concerns over supply disruptions, has exerted selling pressure on the commodity-linked Canadian Dollar.

The Bank of Canada conveyed a more optimistic view on the nation’s inflation outlook in its December meeting statement, leaving room for potential rate hikes. However, the November Consumer Price Index (CPI) did not decelerate, suggesting that the likelihood of another interest rate hike may have diminished.

In contrast, market expectations lean towards potential interest rate cuts in the US next year. The Federal Reserve (Fed) maintained rates at 5.25%-5.50% in its last meeting, with Fed Chair Jerome Powell noting that the timing of rate cuts would be the “next question.” The dovish shift in the Fed’s stance has led to a decline in the US Dollar and lower bond yields.

Thursday’s data from the US Department of Labor showed that the weekly Initial Jobless Claims figure fell short of expectations, coming in at 218K for the week ending December 23, below the projected 210K. Additionally, Pending Home Sales in the United States remained flat at 0%, weaker than the estimated 1.0%.

Later on Friday, the Chicago Purchasing Managers’ Index (PMI) for December is expected to be published, with forecasts indicating a decline from 55.8 to 51.0. The market is experiencing a quiet session as traders shift into holiday mode heading into 2024.