The USD/CAD has had one of the strongest bearish trends during the pandemic. Fueled by a wild bounce in the oil prices from the negative territory, the Canadian dollar’s strength kept growing by the day.
The recent months’ consolidation seen in the oil price did not stop the USD/CAD’s decline. In fact, it continued, looking weaker than ever. Is the price of oil the only driver behind the USD/CAD decline?
Unlikely. The answer comes from the Bank of Canada, which recently became one of the first central banks in the world to taper the quantitative easing program started during the pandemic. In sharp contrast, the Fed in the United States insists that an easy stance is still needed, despite the US economy running at full speed ahead.
As such, the USD/CAD pair did nothing but reflect the monetary policy differences between the two central banks. On the one hand, the Bank of Canada is unwinding the easy policy. On the other hand, the Fed keeps it in place.
USD/CAD Technical Analysis
Brave bulls may have a chance at a contrarian trade right at these current levels. The pair has reached dynamic support at the lower edge of the rising channel. Bulls may want to go long with a stop at the 1.1950 and a take profit at 1.25, aiming a move on the opposite side of the channel.