USD/CAD Price Analysis: Bears Pounce Amid Weak USD, Oil Rise

Republished By Plato

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Crude imports to China rose in the first two months of the year.
Data from Canada showed a larger-than-expected trade surplus in January.
The US dollar weakened significantly after Powell’s testimony.

The USD/CAD price analysis reveals a bearish trend as the Canadian dollar rose, fueled by surging oil prices. Simultaneously, the dollar’s decline, prompted by Powell’s dovish remarks, weighed on the currency. Meanwhile, there was caution ahead of the US jobs report.

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Oil prices rose on Friday amid signs of improving demand in the US and China. Notably, there was a decline in distillate and gasoline inventories last week. Meanwhile, Crude imports to China rose in the first two months of the year. An increase in oil prices boosts the Canadian dollar as Canada mainly exports oil.

Additionally, data from Canada revealed a larger-than-expected trade surplus in January, supporting the Canadian dollar.

Meanwhile, the US dollar has weakened significantly across the board after Powell’s testimony, allowing other major currencies to strengthen. Powell said the Fed was slowly gaining confidence that inflation was declining. Therefore, rate cuts might come later in the year.

On the other hand, the Bank of Canada held rates on Wednesday and pushed back on expectations of rate cuts. Governor Tiff Macklem said it was too early to consider rate cuts as underlying inflation was still high. Consequently, the diverging outlooks between Canada and the US have weighed heavily on USD/CAD.

Investors eagerly await 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 might add 200,000 jobs in February.

USD/CAD key events today

Canada employment change
Canada unemployment rate
US nonfarm employment change
US unemployment rate

USD/CAD technical price analysis: Bears shatter bullish boundaries

On the technical side, USD/CAD bears have taken full control, breaking out of the bullish channel. Moreover, the price has broken below a significant support level at 1.3450. Meanwhile, the indicators on the chart show a steep bearish move. The 30-SMA trades far above the price, indicating a massive swing. At the same time, the RSI has fallen into the oversold region, supporting solid bearish momentum.

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Given the solid bearish bias, the price might hit the next target at 1.3375. However, it might pull back to retest the 1.3450 level as resistance before continuing lower.

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