- USD / CAD has seen a strong reversal to the upside, having been close to hitting fresh weekly lows below 1.3040.
- The pessimistic comments from Canadian health officials and Prime Minister Trudeau appear to have contributed to sour sentiment in the CAD.
The USD / CAD has seen a strong reversal from lows near 1.3040 recently, with the pair now trading at 1.3080 with gains of almost 20 pips or just over 0.1% on the day. USD / CAD was close to hitting new lows for the week (set just below 1.3040 on Wednesday), but the pair has now reversed back to trading at levels it has been trading at most of the week ( between approximately 1.3060-1.3120).
CAD hurt when Prime Minister Trudeau hints at stricter virus control measures
While Covid-19 concerns have been on the agenda of CAD traders for some time (the USD / CAD, like other major USD currencies, has been hit this week by vaccine optimism and blocking pessimism).
However, lately the number of viruses north of the border has increased. Canadian health officials warned today that daily Covid-19 infections could hit 60,000 percent by the end of December from their current levels of 4.8,000 if people continue to increase their number of daily contacts. These warnings were followed by comments from Canadian Prime Minister Justin Trudeau, who said Canada is experiencing a “massive increase” in cases and there is a risk that hospitals will be overwhelmed. Canadians would have to do more to contain the virus than they did a few weeks ago, which he said was frustrating.
While no official measures to curb the spread of the virus were announced on Friday, markets are now raising their expectations that some form of economic restriction will be applied in the coming days.
As a summary, there was also some important Canadian data today in the form of retail sales figures for September, as well as new home price index data for October. Retail sales were much stronger than expected at + 1.1% MoM (0.2% expected), while Core Sales rose equally strong 1.0% (expected was also 0.2%). CAD, however, was unfazed and focused more on global issues.
USD / CAD moves away from lows but bearish bias remains intact
USD / CAD could be well below lows and may not have been able to set new weekly lows earlier this Friday, but the pair continues to trade within the confines of a downtrend channel, implying that, most likely, the routine returns to 1.3000 will continue.
The trend channel links the lows of November 16 and 18 (approximately 1.3065 and 1.3035 respectively) and the highs of November 13 and 19 (approximately 1.3170 and 1.3125 respectively). On the downside, the next key area will of course be Friday’s lows at 1.3040, as well as weekly lows just below that, both of which will need to be broken at some point if the cross is to continue south. To the upside, the top of the downtrend channel will likely come into play around the 1.3100 psychological mark. Above that, there is key resistance in the form of the Nov 16-19 highs at 1.3125. Then there is the 21 DMA at 1.3140.