- Saudi Arabia plans to increase production after abandoning its $100 oil price target.
- Market participants are focused on Canadian GDP data.
- Initial US jobless claims fell to 218,000, below forecasts of 225,000.
The outlook for USD/CAD shows a recovery from the lows hit earlier this week. The Canadian dollar fell as oil prices fell, while the greenback was steady after upbeat economic data in the previous session.
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Oil prices fell on Thursday amid concerns over oversupply. The Financial Times reported that Saudi Arabia planned to increase production after abandoning its $100 oil price target. Increased production is likely to loosen the market and affect prices. At the same time, oil was weak as the conflict in Libya was partially resolved. The conflict initially reduced domestic production, tightening the market.
Market participants are now focused on Canadian GDP data, due later in the day. Economists expect GDP growth of 0.1 percent in July. The actual figure will guide the outlook for a rate cut by the Bank of Canada. Currently, traders expect a rate cut of 67 basis points before the end of the year. Moreover, there is a chance that the central bank will implement a massive tapering after the Fed cuts by 50 basis points.
Meanwhile, the US dollar was firm after data in the previous session revealed a stable economy. Initial jobless claims fell to 218,000, below the forecast of 225,000, pointing to stable labor demand. Low claims could translate into a low unemployment rate, allowing the Fed to achieve a soft landing.
A separate report showed the economy grew by 3.0%, holding steady from the last reading. Steady growth indicates the Fed is likely to avoid a recession.
USD/CAD Key Events Today
- Canada GDP m/m
- Core price index US PCE m/m
USD/CAD Technical Outlook: Bounce meets solid resistance
On the technical side, the USD/CAD price recovered to retest the 30-SMA resistance after making a new low near the 1.3425 level. Bears broke out of a strong, bullish channel with an impulsive move that broke below several major support levels.
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The price is now returning to the 30-SMA and the key resistance level of 1.3500. However, the bears could soon return as it is still trading below the SMA, with the RSI below 50. If the price bounces lower, it could break below the support at 1.3425 to make a new low and continue the downtrend.
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