USD/CAD Daily Price Forecast – USD/CAD on Steady Decline over Crude Oil Price Action

USDCAD lost ground on Tuesday as Crude Oil price gained momentum post Saudi Arabia’s production cuts which boosted commodity linked currency Loonie in global market.
Colin First

The USD/CAD pair extended overnight retracement slide from near three-week tops and weakened farther below the 1.3100 handle through the early European session. As of writing this article the pair is trading at $1.3094 down by 0.30% on the day. A decent recovery in the Turkish Lira, up by more than 5% for the day, helped ease some concerns about the contagion effect and drove flows away from perceived safe-haven currencies, including the US Dollar. Even a strong follow-through uptick in the US Treasury bond yields failed to revive the greenback demand, with traders opting to light their bullish USD bets amid improving global risk appetite. Meanwhile, the ongoing positive momentum around crude oil prices, supported by a report from OPEC, confirming that Saudi Arabia had cut production to avert looming oversupply, underpinned the commodity-linked Loonie and further collaborated to the pair’s heavily offered tone on Tuesday.

Investors Await July’s Import & Export Price Index Data Before Placing New Bets

As market jitters eased it reduced the appeal of the US Dollar, which enjoyed a bullish run in response to the recent slump of the Turkish Lira. While trade relations between the US and Canada showed fresh signs of deterioration, with the Trump administration continuing to threaten the imposition of tariffs, this failed to offer the USD/CAD exchange rate much in the way of support. July’s US consumer inflation expectations reading did little to improve the appeal of the US Dollar on Monday afternoon, with the measure holding steady on the month. With forecasts pointing towards a fresh dip in the latest NFIB small business optimism index the US Dollar could weaken further during today’s trading session. Signs of softening domestic confidence could raise fresh concerns over the ultimate impact of the Trump administration’s belligerent approach to international trade, with the impact of trade tariffs starting to filter through into the wider economy. However, a solid showing from July’s import and export price index results may offer the USD/CAD exchange rate a fresh rallying point. Markets continue to expect the Federal Reserve to deliver further monetary policy tightening before the end of the year, limiting the vulnerability of USD exchange rates.

With today’s downfall, the pair has now retreated nearly 100-pips from overnight swing high level of 1.3171 and has also weakened back below 50-day SMA. Hence, a follow-through weakness, led by some fresh long-unwinding amid absent market moving economic releases, now looks a distinct possibility. Any subsequent weakness is likely to find support near the 1.3055-50 horizontal zone, below which the pair is likely to challenge the key 1.3000 psychological mark before eventually dropping to test 100-day SMA support, currently near the 1.2970 region. On the flip side, momentum back above the 1.3100 handle is likely to confront immediate resistance at 50-day SMA, near the 1.3125 region, which if cleared could lift the pair back towards 1.3170-80 intermediate hurdle en-route the 1.3200 round figure mark.

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