The USDCAD pair declined today as the market reacted to the trade data from the US and Canada. The pair also dropped because of the overall strength of the US dollar.
US trade deficit soars in March
Data from the Bureau of Economic Analysis (BEA) showed that the US trade deficit widened by 11.6% to $44.4 billion in March. This was bigger than the February deficit of $39.80 billion. The deficit rose because of a $15 billion drop in imports and a $3 billion drop in exports. Imports declined to $232 billion while exports declined to $187 billion. According to the bureau, the reason for this was because many businesses were operating at a limited capacity.
The bureau said that the US maintained a trading surplus with South and Central America, Hong Kong, and Brazil among others. At the same time, the deficit with the EU rose by $4.3 billion while that of China dropped by $4.2 billion. The surplus with the UK dropped by $1.2 billion to $0.1 billion. Later today, we will receive the ISM non-manufacturing PMI data from the US.
Canada trade deficit widened
Similarly, the trade deficit in Canada widened to $1.41 billion in March according to data from Statistics Canada. The data showed that exports declined by 4.7% to $46.3 billion in March while imports declined by 3.5% to $47.7 billion. The two declined by more than 10% on an annualised basis. The agency said that coronavirus had caused these declines.
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USDCAD technical outlook
The USDCAD pair dropped to an intraday low of 1.4011 as the market digested the trade numbers. On the daily chart, the price is along the 38.2% Fibonacci retracement level. The pair also formed a double bottom pattern at the 1.3850 level as shown below. I expect the pair to continue moving lower since the overall trend is bearish. But to do this, the pair needs to move below the 1.3850 support shown below.
On the flip side, now that the pair has formed a double bottom, there is a possibility that its price will continue rising. As such, the bearish trend will be invalidated if the price moves above the 23.6% retracement level at 1.4252.