The USDCAD pair followed up on its more than 100-pip surge of Wednesday to continue its advance on Thursday, ahead of the US GDP report. The Loonie found itself under pressure yesterday as a result of a triple combo of factors:
- Risk aversion as a result of rising coronavirus that prompted new lockdown announcements in France and Germany
- Demand fears for crude oil which led to a slump in crude oil prices.
- Bank of Canada (BoC) leaving rates unchanged, with a dovish statement which suggests that rates in Canada could remain low for a long time to come.
Heavy selling pressure on crude oil prices appears to be having a very telling effect on the Loonie at this time. The new lockdowns have heightened fears that demand for the commodity will drop off to the very low levels seen at the onset of the pandemic, and this has driven price on the international benchmark lower by nearly 5% on Thursday. The Loonie is a commodity currency linked with crude oil, and the correlation between the USDCAD and the black gold is playing out at the moment.
The US GDP data is due for release today, with the economy of Canada’s neighbour to the south expected to have grown by 32.0% in the 3rd quarter. The greenback has been on bid since Tuesday evening, and this looks set to continue if the data sets expected later today (third-quarter Gross Domestic Product (GDP) data and weekly Initial Jobless Claims) play to its advantage.
Technical Outlook for USDCAD
Following the completion of the double bottom pattern as a result of yesterday’s huge move, the USDCAD is now challenging resistance at the 1.33487 price mark. A successful break of this level could allow the USDCAD to reclaim two-month highs around the 1.34000 psychological resistance area. Further advance brings the pair to the 1.34656 resistance, with 1.35499 remaining relevant as a viable target to the upside if risk aversion prevails in the market.
On the other hand, a rejection at the 2-month high around the psychological resistance area of 1.34000 could allow for a pullback towards the 1.33487 mark, with the pattern’s neckline serving as another barrier to falling prices before the 1.32044 price level comes into view.
USDCAD Daily Chart
- Download our latest quarterly market outlook for our longer-term trade ideas.
- Follow Eno on Twitter.
- Do you enjoy reading our updates? Become a member today and access all restricted content. It is free to join.