Canadian Dollar looking for a foothold as risk-off flows bolster the US Dollar

The Canadian Dollar (CAD) continues to sink against the US Dollar (USD) as broad-market risk-off flows remain the overall theme for investors on Tuesday. Oil-dependent CAD is catching only minor support from Crude Oil prices, which are seeing a minor rebound after halting a three-day decline.

Canada has both Purchasing Manager Index (PMI) and Employment Rate figures due this week on Thursday and Friday respectively, but market impact will likely remain muted as investors jockey for position ahead of the US Non-Farm Payroll (NFP) data drop on Friday.

Daily Digest Market Movers: Canadian Dollar gives up further ground, USD/CAD probing above 1.3700

• The USD/CAD crossed the 1.3700 technical barrier early Tuesday, sending the pair to a daily high of 1.3736.
• The US Dollar remains well-bid across overly cautious markets as investor confidence shakes out.
• Rising US Treasury yields, faltering global growth outlook, supply-constrained rising Oil prices, and a short-term government funding stopgap for the US are all sending investors into the safe-haven USD.
• Crude Oil prices are rebounding after three straight days of declines as CAD tries to suture the bleed against the USD.
• Economists from several large banks are starting to caution that the USD/CAD could be poised for a rebound if market flows ease up.
• Economists at Scotiabank noted that a firm showing for Canada data this week is needed to bolster expectations of another Bank of Canada (BoC) rate hike.
• MUFG Bank economists don’t see the USD/CAD pair returning to the 1.3600 region until the end of the fourth quarter.
• The US-Canada rate differential remains the key theme to capping USD/CAD chart flows according to HSBC analysts.

Technical Analysis: Canadian Dollar hits 1.3736 as markets extend the risk-off dogpile into US Dollar

Canadian Dollar (CAD) selling peaked at an intraday high of 1.3736 in Tuesday trading, and US Dollar bulls are looking to build out a price floor from the 1.3700 handle.

The USD/CAD has risen nearly 2.5% since last Friday’s dip into 1.3417, where the pair saw a technical rejection from the 200-day Simple Moving Average (SMA).

A continued run up the charts will see the USD/CAD set for a challenge of 1.3860, a region that the pair hasn’t seen since March.

Hourly candles have the USD/CAD drifting steadily higher as short interest fails to push the pair back into the 34-hour Exponential Moving Average (EMA). Bullish momentum appears to be running out of steam, and the Relative Strength Index (RSI) is drifting out of overbought territory.

Sellers will want to build up enough momentum to send the pair back down to 1.3560 near the 100-hour SMA, while bidders will be looking to mark a new high for the day beyond 1.3736.