USD/CAD: Blurred economic picture tilts bias slightly to the upside

The USD/CAD pair awaits a change in circumstances after the Canadian dollar gained 0.6% last week but weakness may be a temporary condition, in the opinion of FXStreet’s analyst Joseph Trevisani. A number of factors, economic and political, are competing for attention.

Key quotes

“In Europe, the UK and parts of the United States COVID-19 cases are again rising but the numbers and the potential for reimposing economic restrictions have not brought on a safety surge to the US dollar.   American economic statistics have generally been good but the linchpin of the labor economy seems to be weakening and with the stimulus blocked so far in Congress the continuation of the recovery is increasingly doubtful. Canada’s resource-dependent economy needs a global recovery and a rise in commodity prices to thrive but neither is on the horizon.”

“Until the economic picture becomes clear neither side of the USD/CAD will be able to secure precedence. The US presidential election was dramatically upended by the COVID-19 of President Trump and several top Republican legislators.  In the febrile and emotional atmosphere of the campaign, the political impact may depend on the progress of the illness in one individual, the President, which makes its uncertainty immeasurably greater.”

“Given the indecision in economic and political fundamentals, technical aspects take on greater significance. Support at 1.3265, 1.3200 and 1.3145 and 1.3050 is well established with a basis in August and September and the nine months from July 2019 to February this year.”

“Resistance levels at 1.3400 and 1.3500 have a lesser pedigree as they stem from pricing during the pandemic volatility and the first half of 2019.” 

“On balance, the reversal of the September move to 1.3000 and the much more solid support below the current levels tilt the bias in the USD/CAD mildly higher especially when backed by the incipient US dollar safety trade and the weakness in commodities.”