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  • USD/CAD price remains off the highs amid profit-taking.
  • WTI prices rise, supporting the Canadian dollar.
  • Fed’s tapering talks keep the US dollar in a winning position.

The USD/CAD price saw some profit-taking on Thursday, paring off partial gains after hitting the weekly highs. While the pair recovered most of its previously lost positions during the New York session, it last traded between 1.2730-40.

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The US dollar consolidated its most recent rally to its highest level since September 2020, which contributes to the tailwind for the USD / CAD pair. Nevertheless, the prospect of Fed tightening soon helped limit dollar losses. Further, the softening oil market has weakened the commodity-pegged Canadian dollar.

According to the US Bureau of Economic Analysis, the world’s largest economy grew at a 6.6% annualized rate between April and June. Preliminary estimates and market expectations matched the indicator.

Despite the less-than-impressive retrospective data, the US dollar’s bullish outlook continued to hold strong. In fact, the dollar index is stable at around 94.00 and has good support from a prospect of Fed tightening soon.

US policymakers avoid a government shutdown with temporary funding, improving market sentiment. In addition, a large US study shows that the Covid vaccine AstraZeneca has 74% effectiveness, providing hope for overcoming the Delta Covid crisis.

The 10-year US Treasury yield and the US dollar index (DXY) fell from multi-day highs on Wednesday, but the S&P 500 futures continued to recover from their weekly lows and climbed 0.50% over the day.

In any case, traders remain cautious since the House of Representatives has yet to win a decisive battle over infrastructure spending and raising the debt ceiling in the United States. Further, if the Fed can alleviate its worries and concerns over China’s power outages, adding to the Evergrande saga to bring China back to a pandemic-era economy, it questions its risk tolerance.

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USD/CAD price technical analysis: Bulls losing control

USD/CAD 4-hour price chart

The USD/CAD pair remains well above the confluence zone of 1.2710 and key SMAs on the 4-hour chart. The price has so far covered the 48% average daily range. It shows low volatility on the day. The price is consolidating now, while the volume data does not show a healthy condition for the bulls. Trading at the moment is not wise. Hence, it is better to wait for a pullback towards the 20 and 50 period SMAs around 1.2700-10 area. However, if 1.2700 breaks, the bears will dominate the market again and test the 200-period SMA around the mid-1.2600 area.

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