The USD/CAD is among the most interesting pairs we are watching this week after it started to break lower last week. More losses could be on the way this week, especially if US CPI disappoints on Thursday. Here is why the USD/CAD has been falling:
- CAD has been supported in part by a less dovish central bank than expected – the Bank of Canada last week decided to leave interest rates unchanged at 1.75%, reiterating that “the current degree of monetary policy stimulus remains appropriate.”
- CAD has also been underpinned by rebounding oil prices – WTI is up for the third week
- USD has been undermined by a soft US jobs report and speculation for further rate cuts this year – the Fed is widely expected to trim rates by another 25 basis points next week.
Source: Trading View and City Index
From a technical point of view, the USD/CAD’s price action point to a weaker exchange rate:
- There is large bearish engulfing candle on the week, suggesting the sellers took control last week after the bulls had earlier dominated the agenda.
- On the daily, the USD/CAD has broken its corrective trend line, which means the path of least resistance is to the downside
- The bears are possibly targeting the 1.30 handle, which comes in just below the prior lows
GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.