USDCAD – Loonie holds the Upper hand


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By: Stuart Cowell

USDCAD has settled in the lower 1.3200s, above the eight-month low of yesterday, at 1.3190. A weakening US Dollar, coupled with perky oil prices, have been weighing on the pair in recent months, which we anticipate will retain a down-trending bias. USDCAD pair has been trending lower, albeit with waning momentum, since mid-March. The global economic recovery from lockdowns, which were at their zenith in April, has been instrumental in USD-CAD’s downtrend, with the Canadian currency rising concomitantly with oil prices while the US currency has waned as a safe haven unit, and with negative real US yields (on the view that the Fed may become strategically more tolerant of inflation risk) eroding the greenback’s performance. The Canadian Dollar will continue to remain sensitive to fluctuations in the US dollar and oil prices. Downside risks for the Canadian Dollar include the OPEC+ group’s course to easing output quotas, which could weigh on oil prices, alongside the coronavirus pandemic and geopolitical tensions, should they derail the recovery in global asset markets.

Technically the pair has been under the 20-day moving average since July 15 and this forms a key resistance at 1.3360. The H4 chart has tracked lower all week with support at today’s S1 and yesterday’s low at 1.3190, below the psychological 1.3200 level. The 20-period moving average sits at 1.3265.

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