- Data from Canada revealed an unexpected trade surplus of C$638 million in June.
- Canadian services PMI rose from 47.1 to 47.3 in July.
- Oil prices rose on Wednesday as the focus shifted to escalating Middle East tensions.
USD/CAD price analysis paints a bearish picture as the Canadian dollar rebounds after upbeat economic data. At the same time, the craze got a boost from rising oil prices and a pause in the US stock market selloff.
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Data on Tuesday showed an unexpected trade surplus of C$638 million in June as Canadian oil shipments rose. Meanwhile, economists had expected a deficit of C$1.84 billion.
Separate data on Tuesday showed Canada’s PMI rose from 47.1 to 47.3 in July. However, since the figure is below 50, business activity is low. Moreover, the sector is contracting, not expanding.
In particular, the Canadian economy has slowed significantly due to high borrowing costs, and inflation has cooled. For this reason, the Bank of Canada has cut rates twice this year. Furthermore, markets are betting on another rate cut in September.
Meanwhile, oil prices rose on Wednesday as focus shifted to escalating Middle East tensions. Namely, Hamas has chosen a new leader who will succeed the one who was recently killed in Iran. A rise in oil is bullish for the Canadian dollar, a commodity currency.
Further bullish strength came from increased risk appetite as Wall Street rebounded from a selloff. Meanwhile, the dollar was steady despite heightened expectations of a Fed rate cut.
USD/CAD Key Events Today
Investors are not expecting critical economic reports from the US or Canada. Therefore, the price could consolidate.
USD/CAD Technical Price Analysis: Price falls as market sentiment changes
On the technical side, the USD/CAD price is falling after a recent change in sentiment. Bears took control when the previous bullish trend failed to break the key resistance level at 1.3900. The reversal started with a bearish divergence in the RSI, which showed a weakening of the bullish momentum. At the same time, the price made a solid doji candlestick, showing indecision at the critical resistance level.
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Soon after, the bears took control with a break below the 30-SMA and support at 1.3802. The price is now on the verge of breaking below the 0.5 Fib level, allowing the bears to revisit support at 1.3701.
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