USD/CAD Daily Price Forecast – Loonie Falls Below 1.31 Handle on Weak USD & Bullish Crude Oil RallyUSD sell off on comments from Powell & Crude Oil price rally supported by production cut / Sino-U.S trade talk optimism boosts Loonie.
The USDCAD pair continued its bearish price action today following sharp fall during Pacific-Asia market hours which saw the pair scale below 1.31 handle. Following dovish comments from Fed Chair Jerome Powell last night, US Dollar which saw temporary recovery price action turned upside down erasing gains and falling further in broad market as Powell hinted that Fed is going to patiently observe market proceedings before raising interest rates further. Powell stated that Inflation is low and stable in current US market which gives FOMC members some level of flexibility when considering decisions related to policy tightening cycle. This comment is interpreted many traders in market as no possible rate hike in 2019 as opposed to 2 rate hikes announced by Fed’s last month.
Positive Crude Oil Price Action Supports Loonie’s Gains
This changed the medium/long term outlook of market as most traders and investors had priced in fed rate hikes in their trading activity. Further commodity linked currency Loonie is underpinned by positive price action in crude oil market. Loonie bulls continue to maintain strong control over the pair’s price action as crude oil has gained more than 10% since New Year which provides great level of fundamental support. Despite crude oil price moving down slightly earlier this week on US EIA stockpile data, crude oil price reversed loss and continued to trade higher with each passing day supported by impact of OPEC’s production and supply cut plan which came into effect since January 1, 2019. Meanwhile Sino- U.S trade talks related optimism and headlines which indicate positive progress between two parties also provide fundamental support to both Loonie and Crude oil in broad market.
China is the biggest imported of crude oil in global market, given positive progress in trade talks and a rise in value of Chinese currency Yuan, risk appetite in broad market soared significantly. Supported by positive risk appetite Loonie bulls dragged the pair well into 1.31 handle and hit 5 week lows in early European session. As of writing this article, the USDCAD pair is trading at 1.3197 down by 0.27% on the day. Moving forward Canadian calendar has no major releases while US calendar sees release of US Core CPI data. Investors are now waiting for US macro data update for short term opportunity as trading session comes to close for the week. US Dollar could see some upward price action if CPI data set to release tonight has better than expected outcome. However the pair is set to close for the week with price action significantly in favor of Loonie.