USD/CAD is consolidated above 1,4300; The bullish potential seems limited

  • The USD/CAD struggles to gain significant traction and remains about a minimum of two weeks.
  • The recoil in oil prices and moderate perspectives of Boc weakens the Loonie and limit the torque.
  • The USD languishes near the weekly minimum and also acts as a wind against cash prices.

The USD/CAD torque enters a bass consolidation phase after registering strong losses in the last two days and is maintained above 1,4300 during the Asian session on Wednesday. In addition, the fundamental background justifies a certain caution before confirming that a strong setback from a maximum of two decades reached Monday has come to an end.

Crude oil prices have difficulty capitalizing on the rebound from the previous day since the minimum of the year amid commercial tensions between the US and China. This, together with the moderate perspectives of the Bank of Canada (Boc), weakens the Loonie linked to raw materials and acts as a tail wind for the USD/CAD torque. That said, an American dollar (USD) weaker slows the operators to perform aggressive bullish bets around the currency pair.

In fact, the dollar index (DXY), which follows the value of the green ticket in front of a foreign exchange basket, languishes near the weekly minimum amid the expectations that the Federal Reserve (FED) will further reduce the indebted costs At the end of this year. The bets were reaffirmed by the Employment and Labor Rotation (Jolts) reports published on Tuesday, which aimed at a slowdown in the US labor market.

Apart from this, the decision of the president of the US, Donald Trump, to delay 25% commercial tariffs on Canadian and Mexican imports for 30 days contributes to limit the USD/CAD pair. The operators now expect the US economic agenda, which includes the publication of the ADP report on employment in the private sector and the ISM services PMI. This, together with the dynamics of oil prices, should provide some impulse to cash prices.

Canadian dollar faqs


The key factors that determine the contribution of the Canadian dollar (CAD) are the level of interest rates set by the Canada Bank (BOC), the price of oil, the main export product of Canada, the health of its economy, Inflation and trade balance, which is the difference between the value of Canadian exports and that of their 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

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