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USDCAD plunged by -0.75% making its first week of losses in 4 weeks. The Canadian dollar advanced as the BoC chartered a hawkish path in the near term. The Canadian dollar strengthen after BoC raised rates by 75bps on Wednesday.
Oil markets rallied for the second day as investors pay close attention to OPEC+’s next week’s response to the current price slump. USOIL rose by +2.80% on Friday while UKOIL advanced by +2.71% as investors shrug off demand concerns. The rise in oil markets helped lift the Canadian dollar’s strength as a commodity-backed currency.
The dollar correction in the near term is sparked by a soft tone from Fed Chair Powell’s speech as markets braces for a softer landing. Markets are still pricing an 85% chance of a Fed rate hike by 75bps. The Initial Jobless Claims released on Thursday dropped to 222K from an anticipated240K indicating a growing labour market, although the news failed to lift the dollar in the near term.
Traders shift their focus to the employment data from Canada due for release in the New York session. US Barker oil rig count and an address from the Fed’s Waller and FOMC member George will be major drivers today.
Weekly Chart Analysis
The USDCAD remains bound inside a bearish pennant and bulls retreated from near-term resistance at 1.3200 and bears are currently sitting above a 2-week low. Downside pressure is challenged by the 1.2900 and 1.27500 levels, and a breach below that level could trigger selling pressure towards the 1.2000 level.
However, 50-day EMA indicates that the pair maintains a bullish outlook above 1.2750. A defence of that near-term support could see a price rally towards the 1.3200 and 1.3400 levels. The MACD indicator shows that the current trend has a bullish bias as Volume bars trade above the benchmark 0.000 level.
ActivTrader Sentiment tool indicates that 67% of retail traders are bullish on the USDCAD. Markets are still pricing in further tightening by the Fed in September. The slide in oil markets this week as a result of weakening demand could cause USDCAD to rally higher in the near term.
The dollar retreated from a 21-months high as markets takes a risk-on tone after ECB and BoC sounded hawkish sentiments at their policy meetings this week. The Canadian dollar regained ground after BoC delivered a super-sized 75bps rate hike to 3.25% on Wednesday. The oil markets remain a major key driver for the USDCAD pair in the near term.
Daily Chart Analysis
The USDCAD suffered losses for 3-consecutive days as bulls lost handles below the 1.3200 near-term resistance. The pair has a double top at 1.3200 and prices could extend their drop towards the 1.2900 level. A break below the 1.2900 level could trigger selling pressure towards the 1.27500 level. The Stochastic RSI indicator suggests that the pair is moving from an overbought zone and lower prices could be expected.
However, a defence of the 1.2900 level, near-term support could give optimism for bulls to attempt another run above the 1.3200 level. A break above that high could reinforce a bullish outlook toward the 1.3300 Psychological level.
