The USDCAD pair which traded range bound with slight bullish incline since trading session opened for the day hit resistance at 1.31 handle and has since turned back well inside 1.30 handle as CAD remains strong despite claims of weakness surrounding the Loonie based on last week’s price action and geo-political events. While it’s true that oil price has significant impact on commodity linked currency Loonie and price action of US Crude WTI greatly affects CAD’s movement as visible from comparison of daily chart of both USDCAD and WTIUSD, price action indicates that Loonie still has some amount of traction in the pair’s momentum. As of writing this article, USDCAD pair is trading at 1.3084 down by 0.17% on the day.
Loonie Could Gain Upper Hand in Medium Term Based on Macro Data Outcome
The reason for Loonie’s strength and resilience against US Greenback despite broad based strength and increase in demand for USD and a risk averse market situation is the hawkish tone surrounding BOC’s recent monetary policy statement. This is one factor that seems to have been undermined by many investors. A slightly more hawkish tone struck by the BOC at the October meeting has been fully priced in by many investors of Canadian Loonie in broad market. And what it really means is that the growth story is still upbeat in Canada and the market continues to reap benefits from the strong foreign demand. This is clearly evident from GDP forecast for CAD, while the GBP monthly data remains relatively flat, the fact that yearly forecast remains at 2.4% and unemployment rate remains stable at 5.9% is evidence of the growth.
Some amount of upward pressure should be noticeable if the employment data and GDP data scheduled to release this week meets expectations or is better than expected and create strong resistance for USD around 1.3180 to 1.3200. On release front, Canadian calendar remains silent for the day while US calendar sees the release of US PCE core price index data and Personal spending data. Meanwhile in short term, both crude benchmarks are down nearly 1% amid the European political and global growth concerns and this could cap the bounce in the resource-linked Loonie. Expected support and resistance for the pair are at 1.3042, 13018, 1.3000 and 1.3115, 1.3134, 1.3160 respectively.