• USD/CAD posts first weekly gain in two months.
  • WTI loses 5.1% on the week, 12.2% on the month.
  • BOC leaves rate unchanged at 0.25%, cautions on departure from the zero bound.

The USD/CAD scored its first weekly gain in two months as a sharp drop in oil prices weighed on Canadian economic prospects and the central bank stressed that the pandemic recovery is a long term project.

After opening at 1.3064 on Monday the USD/CAD touched 1.3260 on Wednesday after the Bank of Canada meeting, its highest since August 17 and finished at 1.3178 on Friday.

West Texas Intermediate (WTI) had started the week at $39.74 but Tuesday’s 5.8% drop with a close at   $37.12, largely on demand concerns, set the stage for the remainder of the sessions with Thursday and Friday’s finishes at $37.26 and $37.66 the lowest since June 15.

The Bank of Canada left its main interest rate unchanged at 0.25% as universally expected and maintained its quantitative easing program.

Governor Tiff Macklem noted that while the Canadian economy had had a strong recovery from the pandemic closures he expected the pace of the improvement to start to slow.

 “Let me underline, it’s really very premature to start talking about exit. That’s some ways off and that’s really reflected in our decision yesterday to continue our QE program at the current pace,” Mr. Macklem said in a speech on Thursday.

The Canadian labor market has rehired almost two-thirds of the workers laid off or fired in the shutdowns of March and April.  In the United States the rate is just under half.  

Canadian data was sparse. Housing starts jumped to 262,400 on the year in August from 245,400 in July well ahead of the 220,000 estimate and the highest rate since September 2007 at the height of the housing bubble.

American statistics were mixed. The JOLTS job opening list for July at 6.618 million was better than 6 million forecast and June number but is still below the 7 million average for January and February.   Consumer prices were firmer than forecast in August, 0.4% vs 0.3% in the overall and 0.4% vs 0.2% in core with 1.3% vs 1.2% and 1.7% vs 1.6% on the year, suggesting rising consumption.

Initial jobless claims for first week in September were worse than expected, 884,000 vs 846,000 and identical to the week before. Continuing claims rose to 13.385 million from 13.292 million, almost half a million more than the 12.925 prediction.

USD/CAD outlook

The September 1 drop to 1.2994, the first time the USD/CAD had been below 1.3000 since January 8 is beginning to look like the post-pandemic bottom. The brief foray, the lack of subsequent attempts and the firm support at 1.3040 argue that the USD/CAD has exhausted its downward momentum.

The weak US dollar scenario which was behind the general August decline in the greenback was based on the suspicion that the American economy was entering a second wave Covid retraction.  Though that did not occur there has not been sufficient improvement in US statistics, particularly the still high weekly unemployment claims numbers, for a full reverse.  The US economy is not retreating but it is not advancing strongly either and the indecision has infected the dollar.

Because the current level of the USD/CAD is the result of a misapprehension of the US economy the potential for a run to the 1.3400-1.3500 range of July is likely. All that is required is the cooperation of the US economy.

Canada statistics September 7-September 11

FXStreet

US statistics September 7-September 11

FXStreet

Canada statistics September 14-September 18

US statistics September 14-September 18

FXStreet

USD/CAD technical outlook

Relative Strength Index: 48.31

21-day moving average: 1.3151

100-day moving average: 1.3539

200-day moving average: 1.3526

Resistance: 1.3235; 1.3270; 1.3325; 1.3400

Support: 1.3130; 1.3100; 1.3075; 1.3040

USD/CAD sentiment poll

 

 

 

 

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.

Analysis feed

FXStreet Trading Signals now available!

Access to real-time signals, community and guidance now!

Latest Analysis


Latest Forex Analysis

Editors’ Picks

EUR/USD holds above 1.17, shrugging off upbeat US consumer confidence

EUR/USD is trading above 1.17, holding its gains despite upbeat US data. The CB Consumer Confidence jumped to 101.8 points, beating estimates. Fed speakers are awaited and the presidential debate is eyed.

EUR/USD News

GBP/USD retreats from highs amid Brexit, coronavirus uncertainty

GBP/USD is retreating from the highs close to 1.29 as concerns about Brexit talks and rising UK coronavirus cases are taking their toll on the pound. 

GBP/USD News

XAU/USD holds steady near multi-day tops, around $1890 region

Gold built on the previous day's goodish bounce from 100-day SMA and edged higher through the first half of the trading action on Tuesday. The overnight sustained move beyond 100-hour SMA was seen as a key trigger for bullish traders and pushed the commodity to multi-day tops.

Gold News

Presidential Debate Preview: Trump may lose due to his own buildup, market implications

The first presidential debate is set to shake up the elections campaign.  President Trump's playing down of challenger Biden's skills may turn into a double-edged sword. Markets will move on implications for a new fiscal relief package. 

Read more

WTI drops to fresh lows near $39.70 ahead of API

Prices of the American benchmark for the sweet light crude oil broke below the $40.00 mark per barrel and slipped back to the $39.70 region on Tuesday.

Oil News

Forex Majors

Cryptocurrencies

Signatures