- Saudi Arabia plans to increase production after abandoning its $100 price target for oil.
- Market participants are focused on Canada’s GDP data.
- Initial US unemployment claims fell to 218,000, below forecasts of 225,000.
The USD/CAD outlook shows a recovery from lows hit earlier in the week. The Canadian dollar fell as oil prices declined, while the dollar was steady after upbeat economic data in the previous session.
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Oil prices fell on Thursday due to worries of oversupply. The Financial Times reported that Saudi Arabia planned to increase production after abandoning its $100 price target for oil. Increased output will likely loosen the market and weigh on prices. At the same time, oil was weak as the conflict in Libya was partly resolved. The conflict had initially reduced production in the country, tightening the market.
Market participants are now focused on Canada’s GDP data, which is due later in the day. Economists expect 0.1% GDP growth in July. The actual figure will guide the outlook on Bank of Canada rate cuts. Currently, traders are expecting 67-bps of rate cuts before the year ends. Furthermore, there is a chance the central bank will implement a massive cut after the Fed’s 50-bps reduction.
Meanwhile, the US dollar was firm after data in the previous session revealed a steady economy. Initial unemployment claims fell to 218,000, below forecasts of 225,000, indicating steady demand for labor. Low claims could translate to a low unemployment rate, allowing the Fed to achieve a soft landing.
A separate report showed that the economy grew by 3.0%, holding steady from the last reading. Steady growth indicates that the Fed will likely avoid a recession.
USD/CAD key events today
- Canada GDP m/m
- US core PCE Price Index m/m
USD/CAD technical outlook: Rebound meets solid resistance
On the technical side, the USD/CAD price has rebounded to retest the 30-SMA resistance after making a new low near the 1.3425 level. Bears broke out of a strong, bullish channel with an impulsive move that broke below several major support levels.
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The price is now revisiting the 30-SMA and the 1.3500 key resistance level. However, bears might soon return since it still trades below the SMA, with the RSI below 50. If the price bounces lower, it might break below the 1.3425 support to make a new low and continue the downtrend.
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Saqib Iqbal
