USD/CAD looks to close the week more than 100 pips lower near mid-1.31s

Crude oil rally and upbeat data from Canada boost the loonie on Friday.
The pair looks to record its first positive weekly close of June.
Month-end flows and mixed data from the U.S. drag the DXY lower.

Eren Sengezer FXStreet

The USD/CAD, which lost more than 100 pips on Thursday, extended its losses on Thursday amid a combination of a weaker greenback and a stronger loonie. After touching its lowest level in two weeks at 1.3130, the pair started consolidating its daily losses toward the end of the last session of June and was last seen trading at 1.3155, where it was down 0.7% on the day.

Today's data from Canada showed that the real-GDP grew by 0.1% in April to surpass the market estimate of 0%. Furthermore, the raw material price index rose by 3.8% in May following April's dismal 0.8% reading.

Commenting on how today's data could impact the BoC's monetary policy decision in July, "the door is wide open to July given Poloz's emphasis on data dependence, and the GDP figures in particular. We keep our call for a 25bps July hike but still expect the Bank to stay a patient, data dependent path thereafter," TD Securities analysts said.

Meanwhile, supply disruptions and the United States' intention to push its allies to stop importing oil from Iran allowed crude oil to record substantial gains this week. In fact, the barrel of West Texas Intermediate on Friday rose above $74 to touch its highest level in more than three years and provided an additional boost to oil-exporter Canada's dollar.

On the other hand, personal spending increased by less than expected in the United States in May and the UoM's Consumer Sentiment report revealed that the confidence was hurt by the concerns over the Trump administration's trade policy. The US Dollar Index erased all of its gains that it recorded during the first half of the week and is now on track to end the week in the red near 94.30.

Technical outlook

With the drop witnessed in the last two days, the RSI indicator on the daily chart eased to 50, suggesting that the bullish momentum is now non-existent. On the downside, ahead of the critical 1.3000 (psychological level/50-DMA), the pair could encounter an interim support at 1.3130 (Jun. 29 low). 1.2915 (100-DMA) could be the next target below 1.30. On the upside, resistances could be seen at 1.3170 (20-DMA), 1.3200 (psychological level) and 1.3270 (Jun. 29 high).

Author

Eren Sengezer

FXStreet

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

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