- USD/CAD pulls back from nine-day high following a bearish candlestick formation.
- Recovery in oil prices adds to the pair’s weakness.
- BOC is widely expected to hold monetary policy unchanged, Rate Statements will be the key.
USD/CAD stays on the back foot around 1.3295 during early Wednesday. The quote flashed a bearish candlestick formation on Tuesday and stretches the weakness by the press time amid oil recovery.
Prices of oil, Canada’s main export item, are on the road to recovery as concerns mount that Saudi Arabia and Iraq will push other global producers to accept deeper output cuts during this week’s meeting in Vienna. Also contributing to the commodity’s strength was the latest private inventory survey data from the American Petroleum Institute (API) that dropped from +3.64M to -3.72M.
On the contrary, trade tensions between the United States (US) and rest of the global leaders, especially with China, continue to spread the fears of another full-fledged trade war and the weak global growth going forward. The US House recently passed sanctions on senior Chinese officials while China’s Foreign Ministry urged to stop wrongdoing regarding Xinjiang Act. The dragon nation previously announced sanctions on the US Non-Government Organizations.
Due to this, market’s risk tone has been heavier with the US 10-year treasury yields revisiting familiar territories around 1.70% while Wall Street flash losses since the start of the week.
Although the Bank of Canada (BOC) isn’t likely to alter benchmark interest rates from 1.75%, latest signals from the Canadian central bank highlighted threats of economic resilience due to the macro risk. As a result, markets will be on the lookout for clues to the same in the BOC rate statement. Before that, Canada’s third-quarter (Q3) Labor Productivity numbers, expected +0.8% versus +0.2% prior, could offer intermediate moves.
Technical Analysis
Tuesday’s bearish Doji around multi-day high signals the pair’s pullback to 21-day Exponential Moving Average (EMA) level of 1.3260 ahead of highlighting 200-day EMA, around 1.3235, for sellers. On the flip side, buyers will look for an upside break of November top, close to 1.3330, before targeting October and September months’ peaks near 1.3350 and 1.3385 respectively.
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