The USD/CAD outlook shows bullish momentum on Monday as the dollar rises amid political uncertainty in the Eurozone. Meanwhile, the Canadian dollar retreated from Friday’s highs when data showed a robust Canadian economy. 

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The greenback started the week positively as the euro remained weak due to fears of a financial crisis in France. The recent announcement of a snap election means a change in leadership in the country that could worsen its financial state. 

Consequently, French markets sold off last week, bringing back memories of the UK budget crisis. Meanwhile, the Euro fell to an over-one-month low last week, especially since the ECB showed no signs that it would support French markets. The euro’s decline has boosted the dollar as it makes up 57% of the dollar index. 

Meanwhile, the Canadian dollar gave up some of the gains it made last week due to a strong dollar. The loonie strengthened on Friday as data revealed a 1.1% increase in factory sales in April. At the same time, wholesale trade rose by 2.4% in April. 

Furthermore, USD/CAD traders have already priced in the Bank of Canada’s cuts this year. This means that any talk on rate cuts will have little impact on the pair. Last week, the Bank of Canada became the first major central bank to cut interest rates. However, expectations for cuts have fallen since the Fed’s slightly hawkish policy meeting.

USD/CAD key events today

• Empire State Manufacturing Index

USD/CAD technical outlook: Bulls challenge 30-SMA

(Click on image to enlarge)

USD/CAD 4-hour chart

On the technical side, the USD/CAD price is on the verge of breaking above the 30-SMA to retest the 1.3780 resistance level. At the same time, the RSI has gone slightly above 50 into bullish territory. Consequently, there is a chance the price will breach the SMA. If this happens, bulls might challenge the 1.3780 resistance level, seeking a new high.

However, bears have also shown strength with a bearish engulfing candle. If this strength continues, the price might fail to go above the SMA. This could mean a drop to the bullish trendline or the 1.3700 support level.

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