USD/CAD declines as Canadian Dollar strengthens on weak USD, OPEC’s decision
|- US factory activity shows signs of decline in March.
- The Canadian Dollar appreciated due to OPEC’s announcing a cut in oil production.
- USD/CAD Price Analysis: To stay downward biased below 1.3500; otherwise, expect a rally to 1.3600.
USD/CAD trades south of the 100-day Exponential Moving Average (EMA) as the Canadian Dollar (CAD) appreciated on oil supply shortages and a soft US Dollar (USD). The USD/CAD is exchanging hands at 1.3450 after hitting a daily high of 1.3536.
Dampened business activity in the US spurred recessionary fears
Wall Street portrays an upbeat sentiment. Two measures of factory activity in the United States (US), deteriorated, meaning a deeper economic slowdown is around the corner. The S&P Global Manufacturing PMI for March was 49.2, below 49.3 estimates. Later, the Institute for Supply Management (ISM) revealed its Manufacturing PMI, which plunged to 46.3, below the 47.5 foresaw and below February’s data.
Consequently, the greenback erased some of its earlier gains, bolstered by higher oil prices. The US Dollar Index (DXY), which tracks the buck’s value vs. a basket of six currencies, slides from 103.05 to 102.20, down 0.38%.
Hence, the USD/CAD dropped from around 1.3500 and registered a daily low of 1.3424 as traders began to price in a less aggressive US Federal Reserve (Fed).
The Organization of Petroleum Exporting Countries and its allies (OPEC+) announced over the weekend the cut of 1 million barrels of oil gave oil prices a leg up. WTI jumped over $6.00 from its Friday close at $75.68 to $81.00 a barrel.
The latest round of Fed speakers, led by the St. Louis Fed President James Bullard, said that OPEC’s decision would make the Fed’s job more difficult. Bullard reiterated that the Fed needs to raise rates above 5% and emphasized that his forecast is above the median.
On the Canadian front, the S&P Global Manufacturing PMI plummeted to 48.6 from the prior’s figure of 52.4, painting a gloomy economic outlook for Canada’s economy. Of late, the Bank of Canada’s (BoC) Business Outlook Survey (BOS) showed that around half of the firms surveyed expect the country to be in a mild recession. Additionally, 59% of businesses expect inflation above 2% until at least 2025.
USD/CAD Technical analysis
The USD/CAD tumbled below 1.3519, the 100-day EMA, which exacerbated a break below 1.3500. Although the USD/CAD pair reached a weekly low of 1.3424, the pair has recovered some ground as sentiment continues to deteriorate amidst recessionary scenarios. The USD/CAD neutral to downwards trend will continue if the pair stays below the 100-day EMA. A breach of the 1.3400 figure will expose the 200-day EMA At 1.3371. On the flip side, buyers reclaiming 1.3500 would pave the way to recover the 100-day EMA and beyond.
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.