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USDCAD: Further Upside for the Loonie

Technical Bias: Neutral

Highlights:

  • USDCAD extends losses, falling 0.28% to 1.2154.
  • USDCAD expected to push further below 1.2150 barring any data-driven rally by the USD.

The USDCAD declined on Monday, falling further below 1.22 amid growing support for commodity currencies in the wake of rising oil prices.

The USDCAD bottomed out at 1.2149 in Monday’s European session. It would later consolidate at 1.2154, declining 0.28 percent. The USDCAD is supported at 1.2131. On the upside, resistance is likely found at 1.2307, the high from April 21.

 

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The USDCAD is digesting losses of around 1 percent over the past five days, as weak US data and rising oil prices have lessened the appeal of the US dollar. Crude oil prices are trading in lockstep with the greenback, climbing for three consecutive weeks and reaching new 2015 highs. This naturally bodes well for commodity-driven currencies like the Canadian dollar.

The Canadian dollar has rebounded more than 4 percent against the greenback since the start of April.

Weekly Outlook

Canada is expected to post weak GDP figures on Thursday. The country’s gross domestic product is forecast to fall 0.1 percent in February, following similar drop the previous month. Bank of Canada Governor Stephen Poloz has told the markets to prepare for an “atrocious” first quarter stemming from the oil price collapse.

Further easing on the part of the BOC is unlikely at this stage as policymakers are confident that exports will pick up in the latter half of the year.

Several US headlines will impact the flow of the USDCAD this week, including consumer confidence, Q1 GDP and the Federal Reserve.

Daily Strategy

There appears to be no incentive to push the USDCAD in either direction at the moment. The market rejected the 1.22 level in the European session, setting the stage for a re-test of the initial support line. Barring any data-driven rally for the US dollar, the pair could extend its losses below 1.2150 in the rest of the week.

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