USD/CAD Outlook: Bears to Pounce 1.23 as Oil Soars, US Yields Tumble

USD/CAD Outlook: Bears to Pounce 1.23 as Oil Soars, US Yields Tumble

  • USD/CAD tumbles to mid-1.2300 and lowers on the day.
  • Crude oil prices remain near multi-year highs, giving room to Cad.
  • US yields fell after the US CPI data was released that further weighed on the USD/CAD.

Throughout the Asian session, the USD/CAD outlook remained weak, last hovering around its lowest level since July 6, just above mid-1.2300.

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Fundamental outlook: Oil and US yields to guide

Over the next several months, crude oil prices will likely remain near multi-year highs because of an increased likelihood of a supply crunch. In turn, the commodity-pegged Canadian dollar strengthened, which was seen as the key factor dragging USD/CAD price movements amid sluggish US dollar sentiment.

As investors remained uncertain about a prolonged period of inflation in spite of the somewhat stronger US CPI report on Wednesday, the US dollar retreated from its 13-month high. In addition, a sharp decline in yields on long-term US Treasury bonds led to a further fall in the US dollar.

A future tightening of Fed policy has also been fully factored in by the markets. This has discouraged traders from setting new bullish bets for the safe-haven dollar in combination with the risk sentiment. The USD/CAD pair was impacted by this as well.

The market is shifting focus to monthly US retail sales data later in the North American session. US bond yields will also affect the dollar and give the USD/CAD pair some momentum. Finally, oil price dynamics will guide short-term traders on a few opportunities in the future.

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USD/CAD technical outlook: More losses to come

USD/CAD chart outlook

The USD/CAD price remains depressed at around 1.2350. The pair seems too feeble for any upside correction as the price is lying well below the key SMAs on the 4-hor chart. The volume data shows huge bearish potential, pointing more losses towards the 1.2300 handle. If the pair doesn’t hold, it may slide further towards the 1.2240 horizontal level. On the upside, the bullish attempts may be capped by the 1.2400 handle ahead of 1.2420 (20-period SMA) and then 1.2485 (50-period SMA).

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Saqib Iqbal

Saqib Iqbal

Saqib Iqbal is a market analyst, prop fund trader and mentor, serving the industry with his analysis and educational content since 2011. The author has great exposure to different financial markets and institutions. He's well-known for his day trading reviews and multiple timeframe analysis.