USD/CAD: Close ties with US economy inhibits loonie’s rally

USD/CAD made one attempt to join the other major pairs in selling the US Dollar pushing it to 1.3350 on Thursday but the support held and the loonie closed the week at 1.3416, remaining just above its pre-pandemic level. US rise in Covid cases and potential damage a concern for the closely allied Canadian economy are preventing CAD to follow the rise of other majors against the dollar, FXStreet’s analyst Joseph Trevisani briefs.

Key quotes

“The Canadian economy and its dollar have two main concerns that are inhibiting its full rise in concert with the other majors. First, its position as the biggest US trading partner makes it susceptible to American economic weakness should the pandemic again force a US shutdown. Second, its resource dependent GDP needs a global recovery to prosper, a very uncertain prospect even with the massive spending of the world’s central banks and governments.”

“The loonie’s restraints should not prevent its improvement against the dollar in the week ahead, but it will likely move less against its North American colleague than its overseas competitors.”

“The moving averages are unusually mixed with the 200-day the lowest at 1.3516 reinforcing at 1.3515 resistance line.The 21-day at 1.3551 is in the middle of the June 12 to July 20 range and the 100-day is well out of the picture at 1.3842.”