USD/CAD Outlook Turns Neutral as Price Gains 1.26 After Poor CAD GDP

USD/CAD Outlook Turns Neutral as Price Gains 1.26 After Poor CAD GDP

  • USD/CAD saw bearish pressure but found traction in the NY session.
  • Canadian GDP reports missed expectations that weighed on the Canadian dollar.
  • Crude oil prices fell that provided respite to the USD/CAD.

The USD/CAD outlook is neutral to bearish around 1.2600 as the pair found some traction after missing Canadian GDP data.

As North American trading opened, the USD/CAD pair rose from two-week lows by around 35-40 pips to 1.2600.

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On Tuesday, the pair remained on the defensive for a third straight session as the US dollar continued to exert pressure. Dollar bulls have taken a defensive stance due to uncertainty about the Fed’s austerity plan and fading hopes for an early recovery.

Although stock markets have improved and US Treasury bond yields have rebounded, a strong dollar has not gained much breathing room. The decline in crude oil prices – which are now down more than 1% for the day – has undermined the commodity-pegged Canadian dollar and helped contain the losses of the USD/CAD pair.

Moreover, disappointing GDP reports have added to the pressure on the Canadian dollar. According to Statistics Canada, the economy shrank by 1.1% in the second quarter of 2021, compared to market growth expectations of 2.5% and 5.5%.

The USD/CAD pair lacks bullish confidence despite the intraday rebound. Therefore, it is prudent to wait for some strong follow-up buying before claiming that the USD/CAD pair has exhausted its recent pullback from YTD lows and is poised for major gains.

USD/CAD technical outlook: 200-SMA to provide respite

USD/CAD 4-hour price outlook
USD/CAD 4-hour price outlook

The USD/CAD pair found some buyers around the 200-period SMA on the 4-hour chart. The pair is now above 1.2600 area under the congestion of 20/50 SMAs on the same chart. The pair has covered 57% average daily range so far. It shows the pair is still lagging strength to gain further. The price is only testing the lower end of a widespread bar of Friday. This can be another selling opportunity if the price bar turns out to be a no-demand bar.

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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.