- Falling US Treasury yields this week exerted pressure on the dollar.
- The Canadian dollar held gains amid rising oil prices.
- Canada’s second-quarter GDP report will likely show a significant slowdown.
Today’s USD/CAD price analysis is bearish amid dollar weakness and Canadian dollar strength. Falling US Treasury yields this week exerted pressure on the dollar ahead of the pivotal US nonfarm payrolls data. Meanwhile, the Canadian dollar held gains amid rising oil prices.
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On Thursday, the Canadian dollar made slight gains against the US dollar. Still, it remained significantly weaker in August due to the slowdown in China’s economy, impacting currencies tied to commodities.
Michael Goshko, an analyst at Convera Canada, noted, “Among G10 currencies, those lagging in August are primarily from the commodity group. This is largely influenced by ongoing concerns about China and its implications for global growth and commodity demand.”
Notably, China’s official factory survey revealed a fifth consecutive month of contraction in manufacturing activity in August. Consequently, there are worries about the health of the world’s second-largest economy.
Meanwhile, oil prices closed Thursday with a 2.5% increase at $83.63 per barrel. Oil is a major export for Canada.
Elsewhere, economists indicated that Canada’s second-quarter GDP report, to be released on Friday, could show a significant slowdown. Moreover, analysts are forecasting a growth rate of 1.2%, down from 3.1% in the first quarter of the year. Despite recent signs of higher inflation, the Bank of Canada may halt its interest rate hikes, keeping the key rate steady at 5.00%.
USD/CAD key events today
Investors eagerly expect the US nonfarm payrolls report and manufacturing PMI data. The focus will be on the employment report that will show whether the labor market is still tight or is easing.
USD/CAD technical price analysis: Bears take a Breather at critical 1.3500 support level.
On the charts, USD/CAD has paused at the 1.3500 key support level. This comes after bears took control at the 30-SMA, and the RSI dipped into bearish territory under 50. Meanwhile, the previous bullish trend paused at the 1.3600 resistance level.
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Although the price punctured this resistance, bulls could not sustain a move higher. This allowed bears to take charge with a solid engulfing candle. The takeover was further confirmed when the price broke below the 30-SMA. If bears break below 1.3500, the price will likely dip to 1.3450.
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Saqib Iqbal
