USD/CAD bears struggle to push pair below 1.3000

USD/CAD trades broadly flat on Wednesday, despite US dollar bears pushing the Dollar Index below 92.00.
CAD was thus one of the worst-performing G10 currencies, alongside USD and JPY.
Reasons for CAD underperformance likely to do with 1) month end flows, 2) technicals and 3) Covid-19 concerns.

Joel Frank Independent Analyst

A few reasons for CAD underperformance…

1) Wednesday was ostensibly the final “proper” trading day of the month; Thursday is a half-day in the US, meaning low volume. Friday is the day after Thanksgiving, which many in the US will likely be taking off, meaning low volume. Next Monday (30 November) is likely to also be a sleepy affair. Thus, many participants are likely to have been inclined to get their month-end rebalancing requirements ticked off on Wednesday and markets did see quite a choppy 16:00GMT London fix. Not that unpredictable month-end flow volatility won’t continue over the next three trading days, but this likely had something to do with CAD downside today.

2) New Covid-19 infections have continued to increase over recent weeks, hitting all-time highs above 7K on Monday. Provinces are one by one imposing greater restrictions, with Alberta declaring a health emergency on Tuesday and banning all indoor social gatherings. Another factor to consider is the fact that, as Canadian PM Trudeau warned Canadian on Wednesday, Canada does not have any domestic vaccine production capabilities and thus is not going to be at the front of the queue compared to other developed nations (such as the US and UK) when it comes to receiving their vaccine orders. This might weigh on Canada’s economic recovery vs some of its peers, weighing on CAD.

USD/CAD struggles to push below psychological 1.3000

3) Finally, the technical point. USD/CAD hit a big level of support on Tuesday, the psychological 1.3000 level. The pair has struggled to push below this level on Wednesday, only managing to print around 1.2987 before reverting back to the big figure. With USD/CAD sat towards the bottom of a recent downwards trend channel, unless it can also break to the south of this, further near-term downside is going to be a struggle. Still, the long-term technical bias for the pair does still point to the downside. If USD/CAD can break below 1.3000 convincingly, this would open up the door to a test of lows of the month around 1.2930.

USD/CAD hourly chart

Author

Joel Frank

Independent Analyst

Joel Frank is an economics graduate from the University of Birmingham and has worked as a full-time financial market analyst since 2018, specialising in the coverage of how developments in the global economy impact financial asset

EUR/USD holds losses near 1.1850 as US, China holidays keep trade muted

EUR/USD opens the week on a softer note, trading near 1.1860 during the Asian session on Monday. Activity is likely to remain muted, with United States markets closed for the Presidents’ Day holiday, while Mainland China is also shut for the week-long Lunar New Year break.

GBP/USD flat lines as traders await key UK macro data and FOMC minutes

The GBP/USD pair kicks off a new week on a subdued note and oscillates in a narrow range, just below mid-1.3600s, during the Asian session. Moreover, the mixed fundamental backdrop warrants some caution for aggressive traders as the market focus now shifts to this week's important releases from the UK and the US.

Gold remains below $5,050 despite Fed rate cut bets, uncertain geopolitical tensions

Gold edges lower after registering over 2% gains in the previous session, trading around $5,030 per troy ounce during the Asian hours on Monday. However, the non-interest-bearing Gold could further gain ground following softer January Consumer Price Index figures, which reinforced expectations that the Federal Reserve could cut rates later this year.

Week ahead: Data blitz, Fed Minutes and RBNZ decision in the spotlight

The US jobs report for January, which was delayed slightly, didn’t do the dovish Fed bets any favours, as expectations of a soft print did not materialize, confounding the raft of weak job indicators seen in the prior week.

Global inflation watch: Signs of cooling services inflation

Realized inflation landed close to expectations in January, as negative base effects weighed on the annual rates. Remaining sticky inflation is largely explained by services, while tariff-driven goods inflation remains limited even in the US.

Ripple Price Forecast: XRP potential bottom could be in sight

Ripple edges up above the intraday low of $1.35 at the time of writing on Friday amid mixed price actions across the crypto market. The remittance token failed to hold support at $1.40 the previous day, reflecting risk-off sentiment amid a decline in retail and institutional sentiment.