USD / CAD rebounds modestly after touching October 2018 lows below 1.2930

• USD / CAD reached its lowest level since October 2018 below 1.2930 in recent trading, although it has since rallied around 1.2960 since then.
• Broad USD weakness has boosted CAD, with the Canadian dollar being the best performer in the G10.

Amid a broad decline in the USD, the USD / CAD It recently posted new lows since March 2018 of 1.2926. Since then, the pair has recovered very slightly back to 1.2930, but is still trading with losses on the day of more than 50 pips or just under 0.5%.

CAD rises to top spot on G10 performance chart

The recent USD / CAD advance to the downside has seen the loonie rise to the top position in terms of its performance on the day against the USD compared to other G10 currencies. However, Credit Agricole posits some reasons to be cautious on the CAD going forward, or at least reasons why the Canadian dollar could underperform the AUD, NZD and NOK even if the USD continues. .

First, the US economy is struggling right now as it copes with a persistently high prevalence of Covid-19, associated lockdowns, and a lack of fiscal assistance from Congress. Since the US is by far its most important trading partner, it is also likely to negatively affect the Canadian economy, meaning that since the US economic outlook weighs on the USD, it could also affect the CAD.

Heading into the loonie, Tuesday’s GDP data will be closely watched, as will Friday’s November jobs report, although USD / CAD is more likely, as always, to adjust for global risk and dynamics. of the USD and the movement of crude oil prices The whole.

USD / CAD breaks below the downtrend channel

Since around November 12, USD / CAD had been moving south within the confines of a downtrend channel; to the downside, this trend line linked the lows of November 16, 18 and 24, and to the upside, it linked the highs of November 13, 19, 23 and 24.

However, USD / CAD broke south of this trending channel on Monday to set new yearly lows below 1.2930. Since then, the pair has retraced some of these losses and is now flirting with the lower bounds of this trend channel again at 1.2950. If the bears can resist, a gradual pullback to year-to-date lows below 1.2930 is likely. Otherwise, the pair could be back within the limits of its recent downtrend channel, in which case the bias would remain towards more probable losses, albeit somewhat more gradually over the next few sessions.

4 hour chart