USD/CAD plunges below 1.2700 on broad US dollar weakness
- USD/CAD dipped to a fresh four-day low at 1.2633.
- Risk-on market mood weighs on the greenback despite a hawkish Fed.
- The loonie is advancing on good economic data and rising oil prices.
During the Asian session, the USD/CAD reached a high of 1.2795. But as the European session got underway, the USD/CAD staged a comeback plummeting beneath 1.2700, down 0.79%, trading at 1.2672 at the time of writing.
The market sentiment is upbeat after a volatile Wednesday session. The market shrugs off the Federal Reserve plans for a tapering, Chinese Evergrande fears abate, and US stocks indices are rising between 0.92% and 1.35%.
In the commodities complex, Western Texas Intermediate (WTI), which price affects the price of the loonie, is up 1.77%, trading at $73.19.
US Jobless Claims and Canadian Retail Sales weighed on the USD/CAD
In the US, the Bureau of Labor and Statistics (BLS) reported that the US Jobless Claims for the week ended on September 18 rose to 351K, versus the estimated 320K. The increase in the unemployment claims reflects the unpredictability in weekly data. In the first week of September, the reading declined, though, in the last couple of weeks increased, suggesting that the economy could be slowing.
Additionally, the US Markit Manufacturing PMI declined slightly in September to 60.5 from 61.1 previous.
Meanwhile, Statistics Canada revealed that the Retail Sales for July shrank by 0.6%, less than the 1.2% foresee by economists. Excluding autos, Retail Sales declined 1% in the same period, versus 1.5% estimated by analysts. According to the report, 0.5% of the retailers were shut in July, compared to the 5.2% closed in June.
USD/CAD Price Forecast: Technical outlook
Daily chart
USD/CAD is approaching the 50-day moving average (DMA) at 1.2618. A daily break of that level could pave the way for further losses. The first support would be the psychological 1.2600. A break of that level will push the USD/CAD towards the September 10 low at 1.2582. A clear breach of that level could motivate the sellers to challenge the 200-DMA at 1.2524.
On the flip side, the buyers need to reclaim 1.2700. A daily break of the figure could expose 1.2800.
The Relative Strength Index, a momentum indicator, is at 49 heading lower, supporting the bearish bias.
KEY TECHNICAL LEVELS TO WATCH
Author
Christian Borjon Valencia
FXStreet
Christian Borjon began his career as a retail trader in 2010, mainly focused on technical analysis and strategies around it. He started as a swing trader, as he used to work in another industry unrelated to the financial markets.
