USD/CAD Recovers Some Losses Following Wednesday’s Tumble

After a sharp drop in the USD/CAD exchange rate yesterday a recovery higher is seen today. The pair last traded at 1.2654 for a gain of 0.3% and has erased about a third of the recent decline.

USD/CAD declined just over 1% yesterday and broke through a rising trendline that originates from a low posted on July 28th that is best seen on a 4-hour chart. The technical break materialized after the North American open yesterday and the pair extended losses in late day trading after the Fed meeting minutes release which triggered a broadly weaker dollar.

The major commodity currencies gained notably against the greenback yesterday and are seen broadly retreating from highs versus the greenback today.

USD/CAD was last seen trading at resistance from a horizontal level at 1.2654 which marks the June 2016 low. Near-term support for the pair is found at 1.2628 which has previously acted as resistance and support. Major upside resistance for the pair is found at 1.2720.

The loonie has diverged from oil prices today as WTI crude oil prices are seen recovering in the North American session. Oil prices (USOIL) broke below a rising trend channel earlier this week that originates from the June low. The technical break points to a potential reversal of trend.

The US dollar index (DXY) turned higher in Asian trading and had reversed losses as a result of yesterday’s FOMC meeting minutes release ahead of the North American open. However, a reversal near prior highs has resulted in a decline to wipe early day gains.

Statistics Canada reported a drop of 1.8% in manufacturing sales for June which was below the analyst estimate of a 1.0% decline. The US department of Labor reported 232,000 unemployment claims filed in the week to August 14th which was ahead of an expected 240,000 claims.

Inflation data will be released by Statistics Canada on Friday at 08:30 EST. In the past five readings, monthly CPI has met expectations twice and fallen short three times.

USD/CAD 4-Hour Chart

USDCAD 4H July 16

Jignesh is an analyst and trader, specializing in currencies and commodities. He utilizes a macro view as well as a proprietary method of pattern recognition that is based on the principles of Elliott wave. His focus is to assess strength in trends, and perceiving high potential turning points in the markets. He brings over 4 years of experience in his current role.