USD/CAD Daily Price Forecast – USD/CAD Range Bound On US Greenback’s Weakness

The USD/CAD pair held on to its weaker tone for the third consecutive session on Tuesday and is currently placed just a few pips above 1-1/2 week lows touched earlier. The pair extended last week’s sharp retracement slide from over three-week tops, triggered by hotter-than-expected Canadian consumer inflation figures, and was further weighed down by the prevalent US Dollar selling bias. The US President Donald Trump criticized the Fed Chair Jerome Powell for raising interest rates and triggered a broad-based USD sell-off on the first day of a new week. Broad-based USD weakness remained a key theme through the early European session on Tuesday and kept exerting downward pressure on the major. As of writing this article, USDCAD is trading at 1.3028 down 0.15% on the day.

Dollar’s Weakness Remains Main Factor For Downtrend Movement

Meanwhile, a subdued action around crude oil prices did little to influence the commodity-linked Loonie, while technical selling below the 1.3055-50 strong horizontal support was now seen adding to the pair’s weaker tone. In absence of any major market moving economic releases, the pair remains at the mercy of broader market sentiment surrounding the buck, with a follow-through weakness, even below the key 1.30 psychological mark, now looking a distinct possibility. On the release front, US calendar is silent for the day while Canadian calendar will see release of Whole sale monthly data. US dollar was on recovery from slide post positive Canadian macro data release on Friday, however Trump’s comment hit headlines resulting in Dollar losing strength once again.

Domestic rate expectations are firming and yield spreads are narrowing in a CAD supportive manner. Sentiment appears to be delivering additional CAD support as we note the softening in measures of implied volatility and stabilization in risk reversals. A fresh wave of selling pressure has the potential to continue dragging the pair below the mentioned handle towards testing 100-day SMA support, currently near the 1.2980 region. On the flip side, any attempted recovery move might now confront fresh supply near the 1.3050-55 area, above which the pair is likely to aim back towards reclaiming the 1.3100 round figure mark.