As the world’s leading investment manager and financial market journalist, I bring you the latest insights on the USD/CAD pair’s intraday direction, influenced by a mix of diverging forces. The uptick in Oil prices is bolstering the Loonie while creating headwinds for the major. On the other hand, rebounding US bond yields and a softer risk tone are supporting the USD, providing a boost to the pair.
Despite Friday’s significant 100-pip surge, the USD/CAD pair is currently trading within a narrow range at the beginning of the week. Crude Oil prices are on the rise, driven by a potential hurricane in the US Gulf Coast, which could impact US refining capacity. This increase in Oil prices is strengthening the Loonie and limiting the pair’s upside potential. However, several factors are favoring bullish traders and hinting at potential upward movement.
OPEC+ has delayed production increases, and concerns about global supply persist due to slowing oil demand in China. Additionally, lackluster US jobs data from Friday has raised worries about fuel demand in the US, further capping Crude Oil price gains. The recent US Nonfarm Payrolls report highlighted a significant decline in the labor market, impacting economic sentiments.
Market expectations for the upcoming Federal Reserve meeting indicate a 70% chance of a 25-basis-points rate cut, with a 30% probability of a 50-bps reduction. This has led to a slight increase in US Treasury bond yields, supporting the USD. Geopolitical tensions and economic uncertainties have also boosted the appeal of the safe-haven dollar.
On the other hand, the Canadian Dollar faces pressure from weaker jobs data, signaling potential interest rate cuts by the Bank of Canada. This situation reinforces a positive outlook for the USD/CAD pair and suggests further appreciation in the near term. With no major economic data scheduled for release on Monday, the currency pair’s direction will be driven by USD and Crude Oil dynamics.
Technical Outlook
The daily chart’s oscillators, though showing signs of recovery, have yet to confirm a positive bias. Traders should look for sustained strength above the key 200-day Simple Moving Average around 1.3600 before anticipating further gains. A break above this level could push the pair towards the 38.2% Fibonacci retracement level, followed by a potential move towards the 1.3700 mark.
Conversely, support is expected around 1.3550, with a break below leading to a decline towards the psychological level of 1.3500. A conclusive breach below this level would suggest the recent bounce has ended, potentially pushing the pair towards the 1.3440-1.3435 region.
USD/CAD Daily Chart
Overall, the USD/CAD pair’s movement is influenced by a complex interplay of factors, including Oil prices, US bond yields, and risk sentiment. Understanding these dynamics can help traders and investors navigate the market more effectively and make informed decisions about their finances. Stay tuned for more updates on the ever-changing landscape of the financial markets.