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  • USD/CAD shows some selling for the third day in a row and hit a fresh weekly low on Thursday.
  • The drop in crude oil prices blew the crap out and helped limit losses to the modest strength of the dollar.
  • Investors are eagerly awaiting Canadian and US macro releases.

The USD/CAD outlook is bearish during the first half of the European session. The USD/CAD price fell to a new weekly low of 1.2815-20.

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The USD/CAD pair fell into negative territory for the third consecutive day on Thursday after rallying to the 1.2855 range on Wednesday. Even though various factors helped limit any deeper losses, the pair moved farther away from YTD levels hit earlier in the week.

Despite the strong recovery this week from $68.00, crude oil prices have experienced a moderate decline near a monthly high. In turn, this eroded the commodity-linked Canadian dollar, supporting the USD/CAD pair amid a moderate increase in demand for the US dollar.

Due to rising US government bond yields and the Fed’s aggressive forecast, the dollar received some support. According to the so-called scatter plot, the Fed can raise interest rates three times in the upcoming year. Nonetheless, risk sentiment was a headwind for the safe harbor.

The global risk sentiment remained buoyant due to recent optimism fueled by reports that current vaccinations may be more effective than previously thought against the new option. Further, a South African study showed that people infected with Omicron had a lower risk of hospitalization and serious illness than those infected with Delta. Thus, investors became more willing to invest in riskier assets.

The market now awaits the release of the US economic document, which will provide data on the underlying PCE price index and durable goods orders later in the session. Combined with broader market risk sentiment, this will stimulate demand for dollars and give the USD/CAD pair some momentum.

The publication of Canada’s November GDP report will also signal traders. Finally, at the end of this year’s holiday season, oil price action will affect the Canadian dollar and create some short-term trading opportunities around the USD/CAD pair.

USD/CAD price technical outlook: Bearish momentum to continue

usd/cad outlook

The USD/CAD price breaks the key 20 and 50 period SMAs on the 4-hour chart. The price is above the 1.2800 handle, while it looks vulnerable to breaking the round number. The next stop for the pair is the 200-period SMA around the 1.2725 area.

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On the upside, 20-period SMA around 1.2900 will continue to resist the gains. However, breaking above the level may trigger a rally towards swing highs at 1.2960.

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