- China’s crude oil imports rose in the first two months of this year.
- Data from Canada showed a larger-than-expected trade surplus in January.
- The US dollar weakened significantly after Powell’s testimony.
USD/CAD price analysis reveals a bearish trend as the Canadian dollar rose, boosted by a rise in oil prices. At the same time, the dollar’s decline, fueled by Powell’s dovish remarks, weighed on the currency. Meanwhile, there was caution ahead of the US employment report.
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Oil prices rose on Friday amid signs of improving demand in the US and China. It is notable that last week a decline in distillate and gasoline stocks was recorded. Meanwhile, China’s crude oil imports rose in the first two months of the year. An increase in oil prices boosts the Canadian dollar because Canada mainly exports oil.
In addition, data from Canada revealed a larger-than-expected trade surplus in January, supporting the Canadian dollar.
Meanwhile, the US dollar weakened significantly after Powell’s testimony, allowing other major currencies to strengthen. Powell said the Fed is slowly gaining confidence that inflation is falling. Therefore, a rate cut could occur later in the year.
On the other hand, the Bank of Canada kept interest rates on hold on Wednesday and withdrew expectations of a rate cut. Governor Tiff Macklem said it was too early to consider a rate cut because core inflation remained high. Consequently, the divergent outlook between Canada and the US weighed heavily on USD/CAD.
Investors are eagerly awaiting employment data from the US and Canada for more clues on monetary policy. Economists expect an increase of 20,000 jobs in Canada in January. Meanwhile, the US could add 200,000 jobs in February.
USD/CAD Key Events Today
- Employment change in Canada
- Unemployment rate in Canada
- Change in non-farm employment in the US
- Unemployment rate in the US
USD/CAD Technical Price Analysis: Bears Break Bullish Limits
On the technical side, the USD/CAD bears have taken full control, breaking out of the bullish channel. Moreover, the price broke below the significant support level at 1.3450. Meanwhile, the indicators on the chart show a steep bearish movement. The 30-SMA is trading well above the price, indicating huge momentum. At the same time, the RSI fell into the oversold region, supporting a solid bearish momentum.
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Given the solid bearish bias, the price could hit the next target at 1.3375. However, it could pull back to retest the 1.3450 level as resistance before continuing lower.
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