- USD / CAD extends its weekly downtrend and falls to more than three-month lows on Friday.
- Bullish oil prices benefit the CAD and put pressure on the pair amid subdued demand for the USD.
- The oversold RSI on the 1 hour chart warrants some caution before opening aggressive bearish positions.
The pair USD / CAD remains under pressure during the European session on Friday, trading near the lowest level since July 6 around 1.2350.
Crude prices have been stable near multi-year highs and they have been supported by growing signs of a tight supply in the coming months. This, in turn, has continued to benefit the CAD, currency tied to commodity prices, which has been seen as a key factor that has acted as a headwind for the USD / CAD pair amid weak action in the price of the US dollar.
Despite Wednesday’s slightly stronger US CPI report, the dollar has seen a corrective pullback from 13-month highsas investors still seem unconvinced about a sustained period of inflation. This has been reinforced by a sharp drop in US Treasury yields, which has weighed on the USD.
Furthermore, markets now appear to have fully priced in the prospects for an early tightening of monetary policy by the Fed. This, coupled with the prevailing risk appetite, it has prevented investors from opening new bullish positions around the safe-haven USD. This has been seen as another factor that has put some pressure on the USD / CAD pair.
From a technical perspective, the previous day’s break below the 1.2400 level has confirmed a bearish breakout of the lower bound of a short-term descending channel. This could have already set the stage for further losses, although an oversold RSI on the 1 hour chart warrants some caution before opening aggressive bearish positions.
The focus of the market now shifts to the release of monthly US retail sales figures later during the American session. This, along with US bond yields, will influence the USD and provide some boost to the USD / CAD pair. Investors will also take cues from oil price dynamics for some short-term opportunities.
USD / CAD technical levels
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