The USD/CAD currency pair extended monthly losses below 1.3132 on Tuesday before making a late rebound to settle at around 1.3145. The currency pair has been trading in a diving wedge since last week, with the losses being compounded by the disappointing non-farm payroll numbers.
The current bearish run comes following what appears to be a XABCD reversal pattern that ended the most recent bullish run after a consolidative triangle formation on August 25 through September 3.
USD/CAD Fundamentals Overview
From a fundamental perspective, the USD/CAD currency pair is trading at the back of a disappointing week in the US economy following last week’s non-farm payrolls. The US labor market added 130k jobs, which missed expectations of 158k jobs. This triggered a major plunge in the USD/CAD currency pair.
To compound these losses, the loonie is also enjoying a maiden run amid rising oil prices. The Canadian dollar is pegged to commodity prices especially the price of oil given the economy’s dependence on petroleum exports. The WTI Crude Oil price is now trading at about $57.87 per barrel while Brent Crude trades at $62.72.
On Monday, the US Consumer Credit Change beat expectations of $16 billion with $23.29 billion for July but the 3-month bill auction-rate edged lower to 1.92% down from 1.93% in the previous period. The 6-month auction rate was steady at 1.825%.
On the other hand, Canada’s Housing Starts for August beat expectations of 215k with 226.6K while Building Permits edged higher 3.0% outpacing the expectation of 2.3% change for July.
USD/CAD Technical Analysis (the 60-min Chart)
Technically, the USD/CAD currency pair appears to be experiencing extreme bearish pressure as it trades within a diving wedge. However, the pair is yet to hit oversold levels, which suggests that the downward movement could continue through Wednesday.
Therefore, the bears will be targeting short-term profits at around 1.3127 and 1.3106 while the bulls will hope for a rebound towards 1.3161 and 1.3183.
USD/CAD Technical Analysis (the Daily Chart)
In the daily chart, the USD/CAD currency pair appears to have pulled back following a recent attempt to recover from the June-July plunge. Expanding the view to the currency pair’s October 2018-Jan 2019 rally using Fibonacci Retracements, some interesting trading opportunities are created.
The bulls will be targeting long-term profits at around 1.3225, 1.3322, 1.3447 and 1.3542 while the bears will look to pounce at around 1.3020, 1.29.17 and 1.2796.
In summary, the USD/CAD currency pair appears to be experiencing intense short-term bearish pressure but in the long-term, the pressure is modest with the bulls trying to claim control.