The USD/CAD saw a mild pullback in the days following the US jobs data, but that pullback may now be over. The Canadian jobs report on 8 August was weaker than expected, showing the Canadian economy lost thousands of jobs in July as the trade war with the US began to dent economic activity. That prompted traders to increase bets that the Bank of Canada will start cutting rates again, which could cause the Canadian dollar to weaken further against the US dollar.
Technically, there is also a case for a weaker Canadian dollar. The pair has found support at 1.375, a level that has acted as both support and resistance since early May. This level also aligns with the 20-day moving average, strengthening the case that USD/CAD is likely to hold and move higher again, indicating US dollar strength against the Canadian dollar.
Additionally, the relative strength index remains in an uptrend, suggesting that momentum still favours a further rise in the USD/CAD exchange rate. A break above 1.385 could see the pair advance to 1.397, where it stalled in mid-May.
If the US CPI report on 12 August comes in weaker than expected, USD/CAD could reverse and give back recent gains. However, it would need to fall below both support and the 20-day moving average to indicate a further decline towards the lows around 1.358.
At present, momentum appears strong and, with support firmly in place, the odds favour further US dollar strength and a challenge to the mid-May levels.
Written by Michael J. Kramer, founder of Mott Capital Management.
Disclaimer: CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed.
No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction, or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.
Technically, there is also a case for a weaker Canadian dollar. The pair has found support at 1.375, a level that has acted as both support and resistance since early May. This level also aligns with the 20-day moving average, strengthening the case that USD/CAD is likely to hold and move higher again, indicating US dollar strength against the Canadian dollar.
Additionally, the relative strength index remains in an uptrend, suggesting that momentum still favours a further rise in the USD/CAD exchange rate. A break above 1.385 could see the pair advance to 1.397, where it stalled in mid-May.
If the US CPI report on 12 August comes in weaker than expected, USD/CAD could reverse and give back recent gains. However, it would need to fall below both support and the 20-day moving average to indicate a further decline towards the lows around 1.358.
At present, momentum appears strong and, with support firmly in place, the odds favour further US dollar strength and a challenge to the mid-May levels.
Written by Michael J. Kramer, founder of Mott Capital Management.
Disclaimer: CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed.
No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction, or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.
Disclaimer
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The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.