- The Canadian dollar depreciated to a two-week low against the US dollar on Friday.
- Canada’s manufacturing sector experienced its most significant decline in over two years.
- The US dollar remained close to a 10-month high against a basket of major currencies.
The USD/CAD outlook brightened on Monday as the Canadian dollar continued its decline from Friday. Notably, the Canadian dollar depreciated to a two-week low against the US dollar on Friday, contributing to its quarterly drop. This decline came from domestic GDP data, implying that the Bank of Canada has likely concluded its interest rate hikes.
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Over the week, it also decreased by 0.6%. Meanwhile, in September, the Canadian dollar experienced a 0.5% decrease. Finally, in the third quarter, it saw a 2.5% decline. Bipan Rai, the global head of FX strategy at CIBC Capital Markets, noted that this decline on Friday was driven partly by month-end flows and the weak GDP figure.
In July, Canadian economic growth came to a standstill, with the manufacturing sector experiencing its most significant decline in over two years. A preliminary estimate indicated that GDP inched up by 0.1% in August. Consequently, money markets anticipate a 26% chance of a rate hike at the Bank of Canada’s next policy decision on October 26, down from the previous 31% before the report.
Moreover, the stronger dollar contributed to the decline in the Canadian dollar. The US dollar recovered from an earlier dip and remained close to a 10-month high against a basket of major currencies. The United States appears to be better prepared to handle the message of enduring higher interest rates, as seen in the market dynamics.
USD/CAD key events today
Some of the major economic releases coming from the US include the following:
- ISM manufacturing prices.
- The ISM manufacturing PMI.
- Fed Chair Powell’s speech.
USD/CAD technical outlook: Engulfing candle sparks bullish momentum.
The USD/CAD price has confirmed a bullish takeover with a bullish engulfing candle, a break above the 30-SMA and the 1.3550 resistance level. Moreover, the price is now making higher highs and lows, indicating the start of an uptrend.
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However, the price still needs to start respecting the 30-SMA as support to show a strong bullish trend. At the same time, the RSI should stay above 50. With bulls in control, the price will soon break above the 1.3600 and the 1.3650 resistance levels.
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