The USD/CAD currency pair on Thursday pulled back towards the 1.4000 key level amid increased fears over the potential impact of the coronavirus. The deadly disease has continued to wreak havoc on financial markets across the world as countries continue to shutdown amid fear of a catastrophic outbreak.
The currency pair’s latest drop pulled it to oversold levels of the 60-min RSI, but a small recovery late on pushed it back up to trade within the normal trading zone.
USD/CAD Fundamentals Overview
From a fundamental perspective, the USD/CAD currency pair is trading at the back of a global economic crisis, which appears to be building up pretty quickly. The coronavirus pandemic has made Europe the new epicenter after China, but looking at the latest data, the perspective could soon shift to the US and the UK. This has led some to speculate that President Trump, amid remaining optimistic on the chances of resuming normal operations by mid-April, could extend the shutdown. This will put more strain on US businesses, which in turn will affect the strength of the greenback. By comparison, Canada appears to be less affected going by the numbers.
And looking at the latest round of economic data, the US preliminary Markit Manufacturing data for March beat the expectation of 42.8 with 49.2. However, the Services PMI missed 42 with 39.1 while the PMI composite edged lower to 40.5 down from 49.6. Non-defense capital goods came out worse than expected with a 0.8% decline compared to an expected fall of 0.4%. Initial jobless claims also rose to 3.283M up from 232k missing out the expectation of 1M.
USD/CAD Technical Analysis (the 60-min Chart)
Technically, the USD/CAd currency pair appears to be trading under significant short-term bearish pressure after hitting new multi-year highs last week. The currency pair pulled back off weekly highs of 1.4600 mid-last week. An attempted recovery later in the week has since failed to materialize.
Therefore, the bears will be looking to extend the current declines towards 1.2940 or lower at 1.3823. On the other hand, the bulls will target profits at around 1.4179 or higher at 1.4376.
USD/CAD Technical Analysis (the Daily Chart)
In the daily chart, the USD/CAD currency pair appears to be still trading under significant long-term bullish pressure after this year’s rally. The currency pair has rallied from 1.2959 at the start of the year to top 1.4600. The latest pullback has come after it hit overbought levels last week.
The bulls will be targeting a major rebound at around 1.4405 or higher at 1.4666. On the other hand, the bears will look to extend current losses towards 1.3753 or lower at 1.3494.