USD/CAD heads toward highest since April after BOC's Macklem's dovish comments

USD/CAD has extended its gains, heading toward the July high of 1.2591.
BOC Governor Macklem said he would not necessarily raise rates automatically.
The US dollar is benefiting from a risk-off mood in markets.

Yohay Elam FXStreet

USD/CAD has hit a daily high of 1.2585, the highest since July 8 – a one-week high. The peak recorded last week was 1.2591 and if Dollar/CAD tops that line, it would trade at the highest levels since April.

The Canadian dollar is under pressure after Bank of Canada Governor Tiff Macklem told the Canadian Press that inflation rises could be temporary but if not, he could raise rates. However, he stressed that "it is not automatic" and that the BOC will have to see what is needed.

Macklem's reluctance to increase borrowing costs has weighed on the Canadian dollar. It comes one day after the BOC tapered its bond-buying scheme by C$1 billion per week, as expected, and surprised investors by downgrading its 2021 forecasts.

The US dollar is gaining ground amid a downbeat market mood. Macklem's American peer, Federal Reserve Jerome Powell, repeated his stance that price rises are temporary. Earlier, US data mostly missed estimates, weighing on sentiment and supporting the safe-haven dollar. Jobless claims came out at 360K in the week ending on July 9 and industrial output rose by only 0.4% in June.

On the other hand, WTI Crude Oil has bounced off the lows of $71 it hit earlier in the day, allowing the C$ to refrain from lower levels and escape hitting the highest in around 11 weeks.

USD/CAD Technical Analysis

Dollar/CAD is bullish, trading above the 50, 100 and 200 Simple Moving Averages and enjoys upside momentum. The Relative Strength Index is still below 70, thus outside oversold conditions.

Above 1.2591, the next lines to watch are 1.2560 and 1.26. Support awaits at 1.2510, 1.2440 and 1.23.

Author

Yohay Elam

FXStreet

Yohay is in Forex since 2008 when he founded Forex Crunch, a blog crafted in his free time that turned into a fully-fledged currency website later sold to Finixio.

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