- USD/CAD advances during the day are facing resistance at the 50-day EMA at 1.2857.
- Falling oil prices and sentiment weighed on the Canadian dollar, a tailwind for USD/CAD.
- USD/CAD Price Analysis: A Break Above 50 Day EMA Could Clear Path To 1.3000; otherwise, 1.2800 is targeted.
The USD/CAD rises and trims some of Wednesday’s losses as sentiment is mixed following US House Speaker Pelosi’s trip to Taiwan, heightening regional tensions. China’s military drills began as expected, with the country firing missiles in its biggest test in two decades.
After hitting a daily low at 1.2820 and rising towards 1.2876, a daily high, the USD/CAD is trading at 1.2858, up 0.18%.
USD/CAD rises on sentiment and CAD weakness
Sentiment is fragile, as already mentioned. EU and US equities fluctuate, while the USD weakens, trading at 106,200, down 0.30%, supported by falling US bond yields. US employment data, specifically initial jobless claims for the week ending July 30, rose by 260,000, a thousand more than estimated, indicating that the labor market is loosening. The trend is likely to continue as the Federal Reserve extends its tightening cycle.
At the same time, the US trade balance deficit narrowed from -$80.1bn forecast to -$79.6bn in June. Exports rose to $260.8 billion, while imports jumped to $340.4 billion, as expected.
On the Canadian side, the country’s trade surplus widened to 5.05 billion Canadian dollars in June, more than the estimated 4.8 billion dollars, reinforced by a 3.2% rise in energy products, reaching a record.
Meanwhile, falling crude prices left the Canadian dollar exposed to further selling pressure as investors sought safety.
What to watch out for
The Canadian economic docket will update employment conditions in the country, with analysts expecting an increase of 20,000 jobs added to the economy in July and the unemployment rate at 5%. The US economic calendar will include non-farm payrolls for July, estimated at 250,000, down from 372,000 in June. The unemployment rate is expected to remain unchanged at 3.6%.
USD/CAD Price Analysis: Technical Outlook
USD/CAD has been trading around the 50 day EMA for the past three days. Although the buyers are in control, based on the long-term daily EMA residing below the spot price, they will face stiff resistance at the confluence of the 3rd Aug high and the 20-day EMA at 1.2907, which, if is broken, it could send the principal to test the 1.3000 level. Otherwise, a drop to 1.2800 and beyond is anticipated with an eye to the 100 day EMA at 1.2779.
Source: Fx Street
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