USD/CAD posted a first weekly gain in two months after opening at 1.3064 on Monday and finishing at 1.3178 on Friday as a sharp drop in oil prices weighed on Canadian economic prospects and the Bank of Canada (BoC) stressed that the pandemic recovery is a long-term project. Joseph Trevisani, an analyst at FXStreet, believes USD/CAD downside momentum looks increasingly tired and expects a rally towards the 1.34-1.35 zone.
Key quotes
“The BoC left its main interest rate unchanged at 0.25% as universally expected and maintained its quantitative easing program. Governor Tiff Macklem noted that while the Canadian economy had had a strong recovery from the pandemic closures he expected the pace of the improvement to start to slow.”
“The September 1 drop to 1.2994, the first time the USD/CAD had been below 1.3000 since January 8 is beginning to look like the post-pandemic bottom. The brief foray, the lack of subsequent attempts and the firm support at 1.3040 argue that the USD/CAD has exhausted its downward momentum.”
“The weak US dollar scenario which was behind the general August decline in the greenback was based on the suspicion that the American economy was entering a second wave COVID-19 retraction. Though that did not occur there has not been sufficient improvement in US statistics, particularly the still high weekly unemployment claims numbers, for a full reverse. The US economy is not retreating but it is not advancing strongly either and the indecision has infected the dollar.”
“Because the current level of the USD/CAD is the result of a misapprehension of the US economy the potential for a run to the 1.3400-1.3500 range of July is likely. All that is required is the cooperation of the US economy.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD edges lower toward 1.0700 post-US PCE
EUR/USD stays under modest bearish pressure but manages to hold above 1.0700 in the American session on Friday. The US Dollar (USD) gathers strength against its rivals after the stronger-than-forecast PCE inflation data, not allowing the pair to gain traction.
GBP/USD retreats to 1.2500 on renewed USD strength
GBP/USD lost its traction and turned negative on the day near 1.2500. Following the stronger-than-expected PCE inflation readings from the US, the USD stays resilient and makes it difficult for the pair to gather recovery momentum.
Gold struggles to hold above $2,350 following US inflation
Gold turned south and declined toward $2,340, erasing a large portion of its daily gains, as the USD benefited from PCE inflation data. The benchmark 10-year US yield, however, stays in negative territory and helps XAU/USD limit its losses.
Bitcoin Weekly Forecast: BTC’s next breakout could propel it to $80,000 Premium
Bitcoin’s recent price consolidation could be nearing its end as technical indicators and on-chain metrics suggest a potential upward breakout. However, this move would not be straightforward and could punish impatient investors.
Week ahead – Hawkish risk as Fed and NFP on tap, Eurozone data eyed too
Fed meets on Wednesday as US inflation stays elevated. Will Friday’s jobs report bring relief or more angst for the markets? Eurozone flash GDP and CPI numbers in focus for the Euro.