Home USD/CAD Outlook: Bears Dominate as Risk Sentiment Improves

USD/CAD Outlook: Bears Dominate as Risk Sentiment Improves

  • First Citizens BancShares will acquire all of the deposits and loans of Silicon Valley Bank.
  • Investors are betting that the BOC will start lowering rates this year.
  • Retail sales in Canada increased by 1.4% in January.

Today’s USD/CAD outlook is slightly bullish. The dollar slipped lower on Monday as investors assessed what authorities and regulators had done to ease global banking concerns.

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The Federal Deposit Insurance Corporation stated on Monday that First Citizens BancShares Inc. would buy all of the deposits and loans of Silicon Valley Bank.

On Friday, the US Financial Stability Oversight Council stated that despite pressure on some institutions, the US banking sector remained “sound and resilient.” But investors continue to be cautious.

On Friday, the Canadian dollar dropped to a nine-day low against the US dollar before recovering much of the loss. Investors weighed the stress in the global banking sector and statistics suggesting that certain important sectors of Canada’s economy fell in February.

According to data from Statistics Canada, retail sales in Canada increased by 1.4% in January. Flash estimates, however, indicated a 0.6% loss in February, along with drops in wholesale trade and manufacturing sales of 1.6% and 2.8%, respectively.

At the close of a turbulent week, Wall Street recovered from an earlier sell-off as US Federal Reserve officials eased market jitters regarding a potential liquidity crisis in the banking sector.

Nevertheless, the unrest has prompted investors to place bets that major central banks, like the Bank of Canada, will switch to lowering interest rates this year. The likelihood that the central bank might ease at its upcoming policy announcement on April 12 is around 40%.

USD/CAD key events today

Investors are not expecting key economic releases from the US or Canada, so the focus will remain on the banking sector.

USD/CAD technical outlook: Bearish below 1.3750

USD/CAD technical outlook

The 4-hour chart shows USD/CAD trading above the 30-SMA and the RSI slightly above 50. This indicates that bulls are in control of the current move. After oscillating between the 1.3650 support and the 1.3750 resistance, bulls finally broke out of the range. 

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They, however, paused at the 1.3800 resistance. This allowed bears to come in and push the price back into the range area. If the price breaks below the 30-SMA, we might see a retest of the range support at 1.3650. The bullish move will continue if the 30-SMA holds as support.

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Saqib Iqbal

Saqib Iqbal

Saqib Iqbal is a market analyst, prop fund trader and mentor, serving the industry with his analysis and educational content since 2011. The author has great exposure to different financial markets and institutions. He's well-known for his day trading reviews and multiple timeframe analysis.