Photo by Michelle Spollen on Unsplash

The Canadian Dollar (CAD) caught a sharp rise against the US Dollar (USD) on Tuesday despite being an overwhelmingly low performer across global markets. The Loonie and the Greenback are in a race to the bottom, and the Greenback is clearly winning as the USD tumbles across the broader FX market, shedding weight against all major counter-currencies.

Crude Oil prices caught a general bullish leg up on Tuesday, providing further support for Loonie-Dollar markets. The CAD is now at a six-month high against the US Dollar, pushing the USD/CAD chart into a third straight month of accelerating declines.

Daily digest market movers: Canadian Dollar hitches a ride on softening Greenback flows

• The Canadian Dollar rose around three-quarters of one percent against the US Dollar on Tuesday, pushing USD/CAD into new half-year lows below 1.3600.
• Canadian Prime Minister cautioned US President Donald Trump that although Canada is not actively pursuing a fully-free trade agreement with China, Canada is still dedicated to seeking trade arrangements outside of the US’ influence. PM Carney made the soft threats regarding the US’ hegemony while in Davos, Switzerland. Trade tensions will likely remain high even as Trump pivots to ambiguous comments that Greenland is “progressing”.
• Crude Oil markets are on the bullish side on Tuesday, providing further structural support for the Loonie. US West Texas Intermediate (WTI) Crude Oil prices are up 2.5% on Tuesday, taking a multi-week recovery to 13.4% from eight-month lows posted in December.
• The Bank of Canada is due with its latest interest rate decision on Wednesday. The BoC is broadly expected to stand pat on interest rates for the time being.
• The Federal Reserve (Fed) will deliver its own interest rate call on Wednesday. The Fed is likewise forecast to leave rates unchanged in the 3.5-3.75% range, though investors will be listening intently for signs of a rhetorical shift toward further future rate cuts.

Canadian Dollar price forecast

The Canadian Dollar’s newfound bull run at the hand of a deflating US Dollar has given Loonie bulls plenty to cheer about. The USD has closed flat or lower against the Loonie for all but one of the last seven straight trading days, falling 2.4% top-to-bottom from mid-January.

Momentum indicators are cautioning that there could be room for a bounce or pullback with the Stochastic Oscillator poised to test oversold conditions. Price action north of the 1.3500 handle also faces a cluster of stiff technical support levels, and chart friction should be expected in the near-term.

USD/CAD daily chart

(Click on image to enlarge)

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