- The USD/CAD quotes with a negative bias in the weekly range in the middle of a weaker USD and the increase in oil prices.
- The mixed technical configuration justifies a certain caution before performing aggressive directional bets.
- A sustained force beyond the confluence of 1.4000 will be seen as a new trigger for the bulls.
The USD/CAD torque attracts some sellers for the second consecutive day on Friday, although it remains confined in a range maintained since the beginning of this week. Current cash prices are traded just below half of 1,3900, with a fall of more than 0.10% in the day in the middle of a combination of negative factors.
The weakest macroeconomic data of the US published on Thursday reaffirmed the market bets for more trimming of interest rates by the Federal Reserve (FED) and keep the US dollar bundles (USD) on the defensive. Apart from this, a modest increase in crude oil prices is seen as a body support linked to raw materials and exerts some downward pressure on the USD/CAD torque.
The action of the price in rank could be categorized as an upward consolidation in the context of the recent rebound from the minimum of the year to date. However, the failure of this week near the confluence of 1.4000 – which includes the simple mobile average (SMA) of 200 days and the level of fibonacci setback of 38.2% of the fall from March to May – justifies some caution.
In addition, the technical indicators in the daily chart have been struggling to win a significant positive impulse. Therefore, it will be prudent to wait for a sustained force beyond the psychological level of 1.4000 before positioning for new profits. The USD/CAD torque could then rise to the intermediate obstacle of 1,4050, to the neighborhood of 1,4100.
On the negative side, the weekly minimum, around the round 1,3900 figure, which also marks the lower end of the short -term range, could continue to protect the immediate decline. A convincing rupture below could drag the region of 1,3855 on a route to the level of 1,3800 and to the minimum of the year to date, around the area of ​​1,3750 touched earlier this month.
USD/CAD DAILY GRAPH
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.
