The recent USDCAD bounce from the lows came in the context of a USD reversal. The Dollar Index bounced too, sending the EURUSD and other majors on a move lower.
However, this week so far, the USD majors diverge. While the AUDUSD or the EURUSD bounced more than a hundred pips from their last week’s lows, the USDCAD failed to correct. It tells us that if the USD majors had a false break to the upside, any correction lower there would trigger the next leg higher in the USDCAD.
Speaking of another leg higher, the USDCAD pair holds inside a rising channel. Moreover, it keeps forming higher highs and higher lows. But at the current levels it met resistance provided by previous support. Therefore, a move lower might be expected, a move that bulls will take advantage of by going long.
Canadian GDP and the Manufacturing PMI To Move CAD This Week
While the main focus for all the USD pairs remains the U.S. presidential election, there is some important Canadian economic data to watch too. This week we have both the Canadian GDP (on Wednesday, expected to expand by 2.9%) and the Manufacturing PMI (on Thursday).
Any disappointment in the two releases will likely weigh on the USDCAD pair. Also, the oil market continues to trade with a bid tone, putting further pressure on a declining CAD.
USDCAD Technical Analysis
The USDCAD pair currently meets resistance, and a pullback into the lower part of the rising channel is expected. As such, bulls may want to buy the dip there, with the area of interest being 1.3350 – 1.3330 and a stop-loss at 1.3200. Providing the pair manages to break through resistance, the target for the long trade should exceed 1.37, with little or no struggling until that level.
More intermarket analysis can be found in the Q4, 2020 Global Market Outlook.
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