The USD/CAD pair closed at 1.2778 on Friday its lowest finish since May 10, 2018. Given the overwhelmingly negative sentiment on the US dollar momentum should continue to test lower. But the rapidity of the recent decline makes the loonie vulnerable to a profit-taking bounce, Joseph Trevisani, an Analyst at FXStreet, briefs.
Key quotes
“Currency markets continue to punish the greenback for the pandemic resurgence in much of the country, though it is largely true that the areas that had the worse infections in the spring, as New York and New Jersey, do not have as numerous an outbreak this time.”
“The difference between the States, Europe and Canada seems to be a matter of timing, with the later surge in the US dominating headlines. It is the potential for economic damage that is the most relevant. The weakness in US payrolls underlined the negative possibilities even though Initial Jobless Claims reverted to trend at 712,000 in the November 27 week after rising to 778,000 in the previous release.”
“The November employment data was a clear win for the Canadian dollar but the balance of economic information is much more ambiguous. Canadian third-quarter annualized GDP was weaker than expected while manufacturing PMI was on a par with that in the US. The Fed is far more active in restraining US rates, but in reality, its intervention is effective against the yield curve in both markets.”
“The outlook for the USD/CAD is lower. A combination of momentum, weak support from two-year-old levels, and the general negative bias for the US dollar will continue to weigh on the pair. However, the speed of last week’s descent and the untraversed ranges leave the USD/CAD open to a profit-taking bounce. A possible catalyst could be a completed stimulus package in the US Congress.”
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