- The loonie has risen for the first time this week.
- The weakness of the US dollar weighs on the USD / CAD pair.
- Good US economic data could not stop the Canadian dollar from rising.
The USD / CAD descends in session. The pair is trading around 1.2643, down 0.38%, as market sentiment improves. Commodity-linked currencies are gaining between 0.18% and 0.35%, while major US indices are up and the US dollar is down across the board.
The loonie was up 0.30% in the US mid-session despite its strong correlation with oil prices. WTI was down 0.25% on Thursday.
On Wednesday, the Bank of Canada kept its overnight interest rate unchanged and kept its bond purchase program at C $ 2 billion per week. Although this was considered moderate for the market, with the loonie weakening, the main driver is now the behavior of the dollar.
Regarding the US economic agenda, Initial US Unemployment Claims for the week ending September 3 reached 310,000 compared to the 335,000 expected by analysts. Its 4-week moving average decreased from 356,000 to 339,500.
The improvement in the labor market is attributed to an acceleration in the launch of the vaccine and a higher demand for workers amidst flexibilization blocking measures. Although the claims declined, most economists expect slower economic growth for the third quarter.
USD / CAD Price Forecast: Technical Outlook
The daily chart shows that the USD / CAD is in an uptrend. However, today’s price action is sloping lower. A daily close below 1.2688 could form a candlestick chart pattern known as dark cloud cover. Such a result could pave the way for further losses. The first support would be the 100-day moving average (DMA) at 1.2563. Once the latter clears, the next support would be the 200 DMA at 1.2524. A sustained break below that level could be the July 6 low at 1.2302.
On the other hand, the bulls would need a daily close above 1.2700, in order to regain control. In that case, the first supply area would be the September 3 high at 1.2762. A clear break out of the latter could expose key resistance levels at the July 19 high at 1.2807 and the August 20 high at 1.2949.
The Relative Strength Index is at 52.89, while it remains above the midline, suggesting a bullish bias, pointing to the downside, so caution is warranted.
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