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

Canadian Dollar outflows continue for Tuesday as investors pile into the US Dollar.
Canada PMIs, labor data still ahead later in the week, but US NFP to overshadow.
Crude Oil prices are rebounding for Tuesday, providing limited support for the CAD.

Joshua Gibson FXStreet

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.

Author

Joshua Gibson

FXStreet

Joshua joins the FXStreet team as an Economics and Finance double major from Vancouver Island University with twelve years' experience as an independent trader focusing on technical analysis.

GBP/USD: Daily gains remain capped by 1.3650

GBP/USD leaves behind Monday’s pessimism and advances marginally on Tuesday. Cable’s humble gains, however, appear to have met quite a decent resistance in the 1.3650 zone for now, in a context of a slight selling pressure hovering around the Greenback.

EUR/USD struggles to regain pace; gyrates around 1.1670

EUR/USD clinches humble gains around 1.1670 following Tuesday’s close on Wall Street. Indeed, marginal losses in the US Dollar encourages spot to set aside two dauly pullbacks in a row and maintain the 1.1700 barrier on the cross-hairs for now. Moving forward, US inflation tracked by the PCE and another revision of Q2 GDP data should keep investors entertained on Wednesday.

Gold steadies near $4,650, eyes multi-month high ahead of US PCE

Gold stabilizes around $4,650 after the previous day's two-way swings as traders await the US PCE data, due later this Wednesday, for cues about the Fed's policy path. The outlook will drive the US Dollar and the non-yielding bullion. Meanwhile, renewed hopes for a US-Iran peace deal, weak oil prices, sliding US bond yields and diminishing odds of an immediate tightening by the Fed undermine the USD. This keeps the precious metal close to its highest level since May 14, set on Tuesday.

Australia CPI expected to show inflation easing in July

The Australian Bureau of Statistics (ABS) will publish the July Consumer Price Index (CPI) on Wednesday at 01:30 GMT. The report is expected to show that inflation rose 3.2% from a year earlier, easing from the 3.8% posted in June. The monthly CPI, however, is forecast at 0.8% following the -0.1% print from the previous month.

Canada hits US goods with tariffs; The rate market sees a problem

On September 8, Canada begins charging its own importers 15%, 25% and 50% on roughly 700 lines of American goods. The measure is billed as dollar for dollar, and on the arithmetic of covered trade it is. What it is not is a tax on the United States.