USD/CAD Outlook Mired Ahead Of Canada Employment By Bearish RSI Signal

The Canadian dollar struggled to hold its ground following a speech by BoC Governor Stephen Poloz as the central bank head pledges to ‘help the economy work through this downshift in growth and keep inflation close to target’.

The comments suggest the BoC will keep the benchmark interest rate on hold at the next meeting on April 24 as ‘Canada’s economic growth slowed late last year, and this weakness is extending into 2019,’ and the central bank may continue to tame bets for higher interest rates as ‘the data are currently giving us a mixed picture and need to be carefully monitored.’

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It remains to be seen if the BoC will abandon the hiking-cycle as officials argue that ‘recent economic data have been generally consistent with our expectation that the period of below-potential growth will prove to be temporary,’ and updates to Canada’s Employment report may shake up the near-term outlook for the Canadian dollar as the economy is anticipated to add 10.0K jobs in March following the 55.9K expansion the month prior.

Keep in mind, the broader outlook for USD/CAD remains constructive following the break of the June-high (1.3386) as the exchange rate stages a near-term breakout after bouncing along the 200-Day SMA (1.3191). However, recent developments in the Relative Strength Index (RSI) highlights a bearish signal as the oscillator snaps the upward trend from earlier this year and appears to be working its way towards overbought territory.

USD/CAD RATE DAILY CHART

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• The USD/CAD advance from the March-low (1.3130) appears to have stalled following the failed attempts to close above the Fibonacci overlap around 1.3420 (78.6% retracement) to 1.3460 (61.8% retracement).
• In turn, USD/CAD may continue to face range-bound conditions as the 1.3290 (61.8% expansion) to 1.3310 (50% retracement) region acts as near-term support, but a close below the stated region opens up the next downside hurdle around 1.3130 (61.8% retracement), which largely lines up with the March-low (1.3130).