Last week, we speculated that USD/CAD could serve as a possible bull haven amidst the ongoing market turmoil. As it turns out, our timing could hardly have been worse, as it came right in the middle of one of the biggest 3-day rallies in inversely-correlated oil prices. From Thursday’s trough to yesterday’s peak, WTI rallied a staggering 26%, unwinding a month’s worth of selling in less than 72 hours. In addition to oil’s big rally, this morning’s better-than-expected Canadian GDP report (0.5% m/m vs. 0.2% expected and -0.2% previously) has also weighed on USD/CAD, though it’s worth noting that the data relates to the month of June, and is therefore hardly “fresh.” Adding insult to injury, the widely-followed US dollar index has also retreated slightly, dropping almost an entire point from Friday’s peak at 96.25.
If you had told me the above information late last week, I would fully expect USD/CAD to be trading below the 1.30 level, if not closer to long-term support at 1.2800. Instead, rates are holding steady just below the 1.3200 level, essentially unchanged from Friday’s open. While both the pair and the daily RSI indicator peeked below their respective bullish trend line support levels on Friday, the breakdown is yet conclusive. Given the prolonged series of higher highs and higher lows in USD/CAD, we’re inclined to give the established uptrend the benefit of the doubt heading into the latter half of the week.
Speaking of the latter half of the week, traders will get a veritable onslaught of top-tier economic data out of North America. Tomorrow brings the ADP Employment report out of the US, which is expected to show 204k jobs were created in August (vs. an initial estimate of 185k) and Factory Orders data. On Thursday, traders will get their first look at Trade Balance data out of both the US and Canada, as well as the US ISM Non-Manufacturing PMI report. Friday brings the main course, with critical job reports out of both the US (expected at 220k) and Canada (expected at 2k), as well as Canada’s August Ivey PMI data.
It is, of course, difficult to handicap so many economic reports, but USD/CAD could catch a double benefit from strong US data, which could both conclusive break of the bullish trend line could finally prompt USD/CAD bulls to toss in the towel and drive the unit back toward 1.30 or lower heading into the weekend.
Source: FOREX.com
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
EUR/USD clings to daily gains above 1.0650
EUR/USD gained traction and turned positive on the day above 1.0650. The improvement seen in risk mood following the earlier flight to safety weighs on the US Dollar ahead of the weekend and helps the pair push higher.
GBP/USD recovers toward 1.2450 after UK Retail Sales data
GBP/USD reversed its direction and advanced to the 1.2450 area after touching a fresh multi-month low below 1.2400 in the Asian session. The positive shift seen in risk mood on easing fears over a deepening Iran-Israel conflict supports the pair.
Gold holds steady at around $2,380 following earlier spike
Gold stabilized near $2,380 after spiking above $2,400 with the immediate reaction to reports of Israel striking Iran. Meanwhile, the pullback seen in the US Treasury bond yields helps XAU/USD hold its ground.
Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in Premium
Bitcoin price shows no signs of directional bias while it holds above $60,000. The fourth BTC halving is partially priced in, according to Deutsche Bank’s research.
Week ahead – US GDP and BoJ decision on top of next week’s agenda
US GDP, core PCE and PMIs the next tests for the Dollar. Investors await BoJ for guidance about next rate hike. EU and UK PMIs, as well as Australian CPIs also on tap.