- The USD/CAD torque has fallen below 1,3600, which is now providing resistance.
- Israel’s attack to Iran fails to support a broader recovery for the US dollar.
- Inflation expectations in the US continue to decrease, exerting pressure on the US dollar.
The Canadian dollar (CAD) is contributing upwards against the US dollar (USD) in the American session on Friday, with the Loonie erasing the profits of previous sessions.
At the time of writing, the USD/CAD is quoting again below 1,3600, with prices that are currently testing the lowest levels in eight months.
Friday’s holders were dominated by reports that Israel had attacked Iranian nuclear facilities and apartment complexes, allegedly killing several high Iranian officials. That news briefly lifted the USD/CAD of its recent minimums, although the torque soon fell again, with the lower trend line of its wedge still being firm.
Also on Friday, the University of Michigan published its preliminary consumer’s feeling survey, showing a notable increase in trust among US homes.
Meanwhile, both the consumer inflation expectations to one year and at five years decreased, reflecting readings of the consumer price index (CPI) and the most soft production price index (IPP) than expected at the beginning of the week.
The slowdown in inflation has increased the prospects for the Federal Reserve (FED) to cut interest rates, reducing US performance and weighing on the USD.
Technical analysis: USD/CAD falls below 1,3600, threatening wedge support
The USD/CAD is approaching the support level of 1,3588, which corresponds to the base of a descending wedge pattern in the four -hour graph. This level has now become short -term resistance, contributing to the bearish impulse.
The relative force index (RSI) is currently about 32, indicating a bassist bias and approaching the over -sales territory, although there is still potential for more falls.
If the bearish impulse persists, the price could reach the level of psychological support of 1,3500, which could lead to a greater fall towards the minimum of October 1,3472. On the other hand, if the price moves above 1,3588 and exceeds the psychological resistance level of 1,3600, it could provide an opportunity for USD/CAD bulls to test the simple mobile average (SMA) of 10 periods in 1,3624.
Four hours of USD/Cad
has fallen below 1,3600, which is now providing
Canadian dollar faqs
The key factors that determine the contribution of the Canadian dollar (CAD) are the level of interest rates set by the Bank of Canada (BOC), the price of oil, the main export product of Canada, the health of its economy, inflation and commercial balance, which is the difference between the value of Canadian exports and that of its imports. Other factors are market confidence, that is, if investors bet on riskier assets (Risk-on) or seek safe assets (Risk-Off), being the positive risk-on CAD. As its largest commercial partner, the health of the US economy is also a key factor that influences the Canadian dollar.
The Canada Bank (BOC) exerts a significant influence on the Canadian dollar by setting the level of interest rates that banks can provide with each other. This influences the level of interest rates for everyone. The main objective of the BOC is to maintain inflation between 1% and 3% by adjusting interest rates to the loss. Relatively high interest rates are usually positive for CAD. The Bank of Canada can also use quantitative relaxation and hardening to influence credit conditions, being the first refusal for CAD and the second positive for CAD.
The price of oil is a key factor that influences the value of the Canadian dollar. Oil is the largest export in Canada, so the price of oil tends to have an immediate impact on the value of the CAD. Generally, if the price of oil rises, the CAD also rises, since the aggregate demand of the currency increases. The opposite occurs if the price of oil drops. The highest prices of oil also tend to give rise to a greater probability of a positive commercial balance, which also supports the CAD.
Although traditionally it has always been considered that inflation is a negative factor for a currency, since it reduces the value of money, the opposite has actually happened in modern times, with the relaxation of cross -border capital controls. Higher inflation usually leads to central banks to raise interest rates, which attracts more capital of world investors who are looking for a lucrative place to save their money. This increases the demand for the local currency, which in the case of Canada is the Canadian dollar.
The published macroeconomic data measure the health of the economy and can have an impact on the Canadian dollar. Indicators such as GDP, manufacturing and services PMIs, employment and consumer confidence surveys can influence the CAD direction. A strong economy is good for the Canadian dollar. Not only attracts more foreign investment, but it can encourage the Bank of Canada to raise interest rates, which translates into a stronger currency. However, if the economic data is weak, the CAD is likely to fall.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
