- A rise in oil prices on Tuesday led to a slight recovery in the Canadian dollar.
- Companies in Canada expect low demand over the next year.
- The data revealed a significant improvement in US manufacturing.
The USD/CAD outlook reveals a muted bearish undertone on Tuesday as the loonie gains momentum due to surged oil prices. In the previous session, the Canadian dollar weakened after a survey supported the view that the Bank of Canada would start cutting rates in June. Meanwhile, the dollar strengthened after upbeat manufacturing data.
–Are you interested to learn more about low spread forex brokers? Check our detailed guide-
A rise in oil prices on Tuesday led to a slight recovery in the Canadian dollar. Oil prices rose as the demand outlook brightened after upbeat manufacturing data in the US and China.
The Canadian dollar weakened on Monday after a poor BoC business outlook survey. According to the poll, companies expect low demand over the next year. This is a sign that Canada’s economy might weaken further. Moreover, inflation has eased, putting pressure on the Bank of Canada to cut interest rates.
At the same time, data revealed a slight improvement in Canadian manufacturing activity in March. However, the sector remained in contraction, slightly below 50.
On the other hand, data revealed a significant improvement in US manufacturing that reduced rate cut expectations. Notably, manufacturing expanded after a long period of contraction. The ISM manufacturing PMI rose from 47.8 in February to 50.3 in March, moving from contraction to expansion.
Manufacturing accounts for nearly 10% of the US economy. Therefore, an expansion in the sector shows a resilient and well-performing economy, giving the Fed more room to hold higher interest rates. Consequently, rate cut expectations fell after the report, boosting the dollar.
USD/CAD key events today
- US JOLTS job openings
USD/CAD technical outlook: Bears eye break below 30-SMA
On the technical side, the USD/CAD price is on the brink of breaking below the 30-SMA as bears reverse the recent bullish move. Initially, bears had pushed the price down to the 0.618 Fib retracement level. However, they failed to break below this level, allowing bulls to take over.
–Are you interested to learn more about forex bonuses? Check our detailed guide-
Although bears challenge the new move, the bullish bias remains intact. The RSI is above 50. Therefore, if the SMA holds as support, the price will retest the 1.3600 resistance level. However, if bears breach the SMA, the price will likely retest the 1.3515 support level. Moreover, the bias would shift to bearish.
Looking to trade forex now? Invest at eToro!
68% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.
Share
Saqib Iqbal
