USD/CAD resumes upside and rises above 1.2700

• USD/CAD extends rebound from multi-year lows above the 20-day SMA.
• US dollar strengthens during the American session amid risk aversion.

The USD/CAD resumed the upside during Friday’s American session and climbed to 1.2707, reaching the highest level in a week. The pair has now risen more than 200 pips from Thursday’s low in an impressive reversal.

The pair is back above the 20-day moving average. A consolidation well above 1.2700 could point to further gains. The next strong resistance is seen at 1.2760.

The rally in USD/CAD was triggered by risk aversion and rising US yields. In Wall Street, the Dow Jones is falling by just 0.52% on Friday, but the index is on track to the worst week in a month, far from the record high, suggesting the rally could have already run out of steam in the short-term.

The DXY is also at daily highs at 90.85 (highest since February 18). The rise in US yields moderated, as the 10-year stands at 1.49%.

Economic data released on Friday had little impact on markets. In Canada, Production Prices rose above expectation. In the US, personal income and spending data showed big gains, in line with expectations. Data was offset over the week by developments on the bond and equity markets.

Technical levels