Canadian Dollar Forecast: Bullish Divergence Hints At Rebound For USD/CAD

ASIA-PACIFIC RECAP

Equity markets traded broadly mixed during Asia-Pacific trade, with Australia’s ASX 200 and Hong Kong’s Hang Seng Index climbing higher while China’s CSI 300 and Japan’s Nikkei 225 lost ground. The Australian Dollar spiked higher in the wake of the Reserve Bank of Australia’s interest rate decision, before continuing its downward slide towards the back-end of the session.

The US Dollar followed 10-year Treasury yields higher, while the New Zealand Dollar and Swiss Franc largely underperformed their major counterparts. Greenback strength weighed on gold prices, with the anti-fiat metal sliding 0.4% lower. Crude oil prices also drifted lower but still remain constructively positioned above $64 per barrel.

Looking ahead, trade balance data out of the US and Canada headline the economic docket alongside manufacturing PMI figures out of the United Kingdom.

Canadian Dollar Forecast: Bullish Divergence Hints at Rebound for USD/CAD

DailyFX Economic Calendar

SHORT-TERM PULLBACK AHEAD FOR CAD

The commodity-sensitive Canadian Dollar has been one of the top-performing major currencies in recent weeks, on the back of the Bank of Canada tapering its Quantitative Easing program and moving forward rate hike expectations.

Resilient crude oil prices and a ramped-up vaccine roll-out have also helped elevate the currency against its haven-associated counterparts, with the USD/CAD exchange rate sliding just over 3% lower in the last six weeks. Canada is now vaccinating as many citizens a day, on a per-capita basis, as the UK and US.

Canadian Dollar Forecast: Bullish Divergence Hints at Rebound for USD/CAD

Source – Worldometer

However, infection numbers have yet to meaningfully decline, with the 7-day moving average tracking cases hovering just shy of 8,000. This suggests that current restrictive measures may remain in place for an extended period of time.

These development could begin to take some shine of the Loonie’s recent run higher and see its haven-associated counterparts peg back lost ground in the coming days. Disappointing employment data for April, scheduled for release on May 7, may intensify this downturn.

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