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USD/CAD Daily Price Forecast – USD/CAD Turns Dovish on Crude Oil Price Action & Falling US T.Yields

Colin First

The USD/CAD pair traded with a negative bias for the second consecutive session and held near two-week lows, set in the previous session. The pair struggled to build on overnight late rebound from an intraday low level of 1.3160, with a combination of factors exerting some fresh downward pressure through the early European session on Tuesday. Against the backdrop of the US-China trade truce, the US Dollar was further weighed down by a sharp fall in the US Treasury bond yields amid expectations of a possible pause in the Fed’s rate-hike cycle. In fact, the yield on the benchmark US 10-year Treasury fell to its lowest level since mid-September and the spread between 2/10-year bond yields narrowed to the smallest level since July 2007. As of writing this article, USD/CAD pair is trading at 1.3175 down by 0.17% on the day.

Ongoing Rally in Oil Prices Underpins Loonie Boosting Selling Bias Surrounding Major

Meanwhile, the ongoing positive momentum around crude oil prices, supported by expectations of OPEC-led output cuts, underpinned the commodity-linked Loonie and further collaborated to the pair’s weaker tone. On release front, US calendar is relatively silent except for speech from FOMC member Williams while Canadian calendar will see release of Q3 labor productivity data but neither release from today’s scheduled is expected to create any huge impact on the pair’s price action. Hence the key focus will remain on the BOC’s latest monetary policy update scheduled to release tomorrow. This coupled with the latest monthly jobs reports from the US popularly known as NFP and Canadian employment data scheduled to release later this week will play an important role in determining the pair’s next leg of directional move.

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Meanwhile Canadian Loonie is also expected to remain fundamentally supported at-least in medium term as Canada’s western select which fell from yearly tops of $79/barrel during summer to recent lows of $13/barrel (Nov 15, 2018) got a boost on news of Canadian government’s decision to cut production from Alberta region which boosted the oil by $10/barrel and western Canadian select is currently trading at $32.91/barrel which is highly supportive to commodity linked currency Loonie. When looking from technical perspective, a follow-through selling pressure has the potential to continue dragging the pair towards 1.3125 intermediate support en-route the 1.3100 handle. On the flip side, the 1.3200 handle now becomes immediate strong resistance, above which the pair is likely to aim towards retesting the 1.3230-35 supply zone.

This article was originally posted on FX Empire

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