The USD/CAD resumed its push lower after a day of respite, as risk-on sentiment held sway in the markets on the back of several fundamentals.
Crude oil prices edged slightly higher on the day, and look set to end the week 6% higher to give the commodity-linked loonie the edge over the greenback.
The greenback was also pressured from comments by Fed Governor Christopher Walker, who reiterated the Fed’s position not to raise rates sooner.
The USD selloff was confirmed after China’s GDP rose by a record 18.3% to signify a strong recovery of the Chinese economy from the pandemic. A lack-luster recovery on the US bond yields helped cement the downside bias on the USD/CAD.
Next week, the Bank of Canada is to make a key decision on whether to taper its QE program, as part of its rate decision and statement.
Technical Outlook for USD/CAD
With the Bank of Canada expected to taper their QE program next week, the USD/CAD may be set for a further drop. Adding some credence to this is the picture on the daily chart, which shows a price confluence around the channel’s upper border.
Price needs to break down the 1.25323 support level, which is currently at risk, for a confirmation of the downside move. This move would have to take out the 1.24790, 1.24489 and 1.23998 support levels for the channel’s lower border to come into view.
On the flip side, a break above the channel allows the bulls to aim for 1.25862, with 1.26219 lining up as a potential target if the advance continues. Price could shoot above the 1.27000 psychological level if the 6 November 2017 low at 1.26647 gives way.