- USD/CAD has seen a sharp reversal higher, having come close to making fresh weekly lows under 1.3040.
- Pessimistic commentary from Canadian health officials and PM Trudeau seems to have contributed to the souring of CAD sentiment.
USD/CAD has seen a sharp reversal from lows close to 1.3040 in recent trade, with the pair now trading in the 1.3080s with gains of nearly 20 pips or just over 0.1% on the day. USD/CAD was close to making fresh lows on the week (set on Wednesday just below 1.3040), but the pair has now reversed to trade back to levels it has spent most of the week trading within (between roughly 1.3060-1.3120).
CAD hurt as PM Trudeau hints at tighter virus control measures
Whilst Covid-19 concerns have been on the agenda of CAD traders for some time (USD/CAD, much like other USD majors has been buffeted this week by vaccine optimism and lockdown pessimism), the focus has until now been on the situation abroad rather than the Covid-19 situation closer to home.
However, virus numbers North of the border have been creeping up as of late. Canadian health officials today warned that daily Covid-19 infections could reach 60K per by the end of December from their current levels of 4.8K if people continue to increase their number of daily contacts. These warnings were followed by comments from Canadian PM Justin Trudeau, who said that Canada is seeing a “massive spike” in cases and there is a risk that hospitals could get overwhelmed. Canadians would have to do more to contain the virus that they did a few weeks ago, which he said was frustrating.
Whilst official measures to curb the virus spread weren’t announced on Friday, markets are now upping their expectations for some form of economic restrictions to be enforced in the coming days.
As a recap, there was also some important Canadian data today in the form of retail sales numbers for September, as well as New House Price Index data for October. Retail sales came in much stronger than expected at +1.1% MoM (expected was 0.2%), while Core sales rose a similarly strong 1.0% (expected was also 0.2%). CAD, however, was largely unfazed and more focused on global themes.
USD/CAD off lows but bearish bias still intact
USD/CAD might be sharply off lows, and might have been unable to set fresh weekly lows earlier on this Friday, but the pair continues to trade within the bounds of a bearish trend channel, which implies that, most likely, the grind back towards 1.3000 will continue.
The trend channel links the lows of the 16 and 18 November (at roughly 1.3065 and 1.3035 respectively) and the highs of the 13 and 19 November (at roughly 1.3170 and 1.3125 respectively). To the downside, the next key area will of course be Friday’s lows at 1.3040, as well as the weekly lows just below that, both of which will need to be broken at some point if the cross is to continue to the south. To the upside, the downwards trend channel top will likely come into play around the psychological 1.3100 mark. Above that, there is key resistance in the form of the 16 and 19 November highs at 1.3125. Then there is the 21DMA at 1.3140.
USD/CAD hourly chart
Note: All information on this page is subject to change. The use of this website constitutes acceptance of our user agreement. Please read our privacy policy and legal disclaimer. Opinions expressed at FXstreet.com are those of the individual authors and do not necessarily represent the opinion of FXstreet.com or its management. Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.
Recommended content
Editors’ Picks
EUR/USD trades weak below 1.0800 amid Good Friday lull, ahead of US PCE
EUR/USD remains depressed below 1.0800 after soft French inflation data, amid minimal volatility and thin liquidity on Good Friday. The pair keenly awaits the US PCE inflation data and Fed Chair Powell's speech for fresh hints on next week's price action.
GBP/USD holds steady above 1.2600 as markets stay calm on Good Friday
GBP/USD trades sideways above 1.2600 amid a typical Good Friday trading lull. A broadly firmer US Dollar could keep any upside attempts limited in the pair ahead of the US PCE inflation data and Fed Chair Powell's appearance.
Gold price sits at all-time highs above $2,230, US PCE eyed
Gold price hit all-time highs at $2,236 on Thursday to finish Q1 2024 with a bang. Most major world markets, including the US are closed due to Holy Friday, leaving volatility around Gold price highly subdued. US PCE inflation and Powell are awaited.
Jito price could hit $6 as JTO coils up inside this bullish pattern
Jito (JTO) price has been on an uptrend since forming a local bottom in early January. Since then, JTO has revisited the key swing point formed in early December, suggesting the bulls’ intention to move higher.
Key events in developed markets next week
Next week, the main focus will be inflation and the labour market in the Eurozone. We expect services inflation to be impacted by the easter effect, while the unemployment rate to be unchanged.