- The Canadian dollar fell due to interest rate differentials and lower oil prices.
- The Ivey PMI found that economic activity in Canada expanded faster in April.
- Data from the American Petroleum Institute revealed a jump in US crude oil inventories last week.
USD/CAD price analysis shows growing bullish sentiment as the Canadian dollar slips on interest rate differentials and lower oil prices. This week, the currency has weakened significantly, and economists warn that differences in political perspectives will continue to weigh on the madman.
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The Canadian dollar fell despite Tuesday’s data showing an improvement in economic activity in April. The Ivey PMI found that economic activity in Canada expanded faster in April, with the index reading 63.0 from 57.5 in March. However, this was not enough to raise the frenzy as markets are confident the Bank of Canada will cut rates at its June 5 meeting. Meanwhile, the Federal Reserve will start much later in September or November. This makes the dollar more attractive to investors as US rates will remain high for longer.
At the same time, the Canadian dollar fell with oil prices. Oil fell after data from the American Petroleum Institute revealed a jump in US crude inventories last week. This is a sign of weak demand in the US. The drop in oil has a negative impact on the Canadian dollar as Canada is a significant oil exporter.
Investors are now awaiting Canadian employment data for more clues on the prospects for a rate cut. More economic deterioration would solidify bets for a June tapering as it would put pressure on the Bank of Canada to reduce borrowing costs.
USD/CAD Key Events Today
Market participants are not expecting any key economic announcements from Canada or the US. Therefore, the pair could continue with their current move.
USD/CAD Technical Price Analysis: Bulls take lead after false breakout
On the technical side, the USD/CAD price is back above its trend line, and the 30-SMA shows that the bulls have taken the lead. This also indicates that the recent move below the trendline was a false breakout. The bulls showed their intention to take control when the price made a bullish candle at the key level of 1.3650.
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The price is now well above the SMA, with the RSI near the overbought region, indicating a bullish bias. Bulls are targeting the critical resistance level of 1.3800. A break above this level would make a higher high, reinforcing the bullish bias.
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