- USD / CAD remained depressed for the third consecutive session on Friday.
- A combination of factors could help limit further losses, at least for now.
- The divergent stance of the BoC / Fed monetary policy should limit any significant rebound.
The pair USD / CAD witnessed some selling during the early North American session and updated multi-year lows around the 1.2265 region in the last hour.
The pair, so far, has struggled to post a significant recovery and remained bearish for the third straight session on Friday. This also marked the fifth day of a negative move in the previous six, although a combination of factors helped limit any further losses.
The US dollar built on the overnight bounce from the lowest level since February 26 and strengthened overall amid generally softer risk tone. Global risk sentiment took a hit after the Chinese PMI indicated a slowdown in the pace of growth in the manufacturing sector.
The data added to market concerns that increasing cases of COVID-19 in some countries (India, Japan and Brazil) could derail the global economic recovery from the pandemic. This, in turn, eroded investor confidence and boosted some safe-haven flows to the dollar.
The USD maintained its intraday gains following the release of mostly upbeat US macroeconomic data. PCE’s annual core price index accelerated to 1.8% in March from 1.4% previously. Added to this, Personal Income increased 21.1%, while Personal Expenses increased 4.2% in March.
From Canada, the monthly GDP figure disappointed expectations and showed a growth of 0.4% in February. Aside from this, a sharp drop in crude prices prevented traders from placing bullish bets around the commodity-linked Canadian dollar and extended some support to the USD / CAD pair.
Despite the supporting factors, the pair has, so far, been struggling to post a significant recovery amid divergence in monetary policies adopted by the BoC and the Fed. This, in turn, suggests that the path of Minor resistance for the USD / CAD pair remains to the downside.
That said, the oversold conditions on the short-term charts warrant some caution before positioning for any further depreciation moves. Therefore, it will be prudent to wait for a modest rebound or short-term consolidation before positioning for a well-established downtrend extension.
Technical levels
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