- The euro remained weak on fears of a financial crisis in France.
- The loonie rallied on Friday as data revealed a 1.1% rise in factory sales.
- Expectations for BoC tapering have fallen since the Fed’s somewhat hawkish policy meeting.
The USD/CAD outlook shows bullish momentum on Monday as the greenback gains amid political uncertainty in the Eurozone. Meanwhile, the Canadian dollar retreated from Friday’s highs as data showed a strong Canadian economy.
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The dollar started the week on a positive note as the euro remained weak amid fears of a financial crisis in France. The recent announcement of snap elections means a change in leadership in the country that could worsen its financial condition.
Consequently, French markets sold off last week, bringing back memories of the UK budget crisis. Meanwhile, the euro fell to its lowest level in more than a month last week, especially as the ECB showed no signs of supporting French markets. The drop in the euro boosted the dollar as it makes up 57% of the dollar index.
Meanwhile, the Canadian dollar gave up some of the gains it made last week on a strong greenback. The loonie rallied on Friday as data revealed factory sales rose 1.1% in April. At the same time, wholesale trade increased by 2.4% in April.
Furthermore, USD/CAD traders have already priced in a Bank of Canada cut this year. This means that any talk of a rate cut will have little impact on the pair. Last week, the Bank of Canada became the first major central bank to cut interest rates. However, expectations for cuts have fallen since the Fed’s somewhat hawkish policy meeting.
USD/CAD Key Events Today
- Empire State Manufacturing Index
USD/CAD Technical Outlook: Bulls challenge 30-SMA
On the technical side, the USD/CAD price is on the verge of breaking above the 30-SMA to retest the resistance level at 1.3780. At the same time, the RSI went slightly above 50 into bullish territory. Consequently, there is a chance for the price to breach the SMA. If that happens, the bulls could challenge the resistance level at 1.3780, looking for a new high.
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However, the bears also showed strength with the bear engulfing candle. If this strength continues, the price may not go above the SMA. This could mean a drop to the bullish trend line or support level of 1.3700.
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