USD/CAD Surges To Approach Critical Level
FOREX.com | Nov 01, 2017 06:53
The past several weeks have not been kind to the Canadian dollar. Less than two weeks ago, key Canadian inflation and retail sales data were released that were significantly lower than expected, which did not bode well for further monetary policy tightening by the data-dependent Bank of Canada. Last week, the BoC indeed held interest rates steady as widely expected, after previously raising rates back-to-back over the summer, but also issued a dovish statement that focused on caution amid uncertainties. These uncertainties included the NAFTA renegotiation, lagging wage growth in the labor market, and lower projections for export growth, housing, and consumption. Most recently, Tuesday saw the release of Canadian GDP figures for August, which came out negative for the first time this year at -0.1%, missing forecasts of +0.1%. This combination of economic data and central bank factors has placed substantial pressure on the Canadian dollar.
The general rise and recovery of the US dollar since early September has combined with this recent Canadian dollar weakness to boost USD/CAD in a sharp uptrend within the past two months. On Tuesday, the currency pair rose once again to approach a major resistance area around: the critical 1.3000 psychological resistance level; 50% of the May-September downtrend; and the 200-day moving average. Most importantly, the 1.3000 resistance level holds major technical significance.
Several key upcoming events that will drive the US dollar this week include Wednesday’s FOMC decision and Friday’s US jobs report. For the Canadian dollar, Friday will also feature Canada’s jobs report. Amid these employment data releases and indications of the Fed’s policy stance via the FOMC statement, the policy contrast/divergence between the Fed and BoC could become even clearer, potentially furthering USD/CAD’s recent bullish run. With any significant breakout above the noted 1.3000 resistance level, the next major upside target resides around the key 1.3200 resistance area.
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