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  • WTI remains on track to close in red for fourth straight day.
  • US Dollar Index climbs above 97.70 on Thursday.
  • Coming up on Friday: Retail Sales data from Canada and PMI data from US.

The USD/CAD pair gained nearly 70 pips on Wednesday as falling crude oil prices and the Bank of Canada’s dovish policy outlook weighed on the loonie. Although the pair extended its rally and touched its highest level in a month at 1.3172 on Thursday, it retraced its daily upside and turned flat near the 1.3140 mark during the American session. Nevertheless, the latest pullback seems to be a technical correction as there no fundamental developments that could ramp up the demand for the CAD.

BoC rate cut odds hurt CAD

Commenting on the BoC’s policy statement and Governor Poloz’s remarks, “with the economy no longer seen as operating close to full capacity, the bank’s tolerance for sub-trend growth is likely to be limited,” said Josh Nye, Senior Economist at RBC Economics. “Today’s statement makes us more comfortable with our call for a rate cut in April, and market odds of a move by mid-year are now slightly above 50%.”

Meanwhile, concerns over coronavirus spreading and becoming a global issue weighed on crude oil prices and dragged the barrel of West Texas Intermediate (WTI) to its lowest level in more than two months below the $55 mark to make it difficult for the commodity-sensitive loonie to stay resilient against the greenback.

On the other hand, the greenback gathered strength amid the heavy selling pressure surrounding its risk-sensitive European counterparts. The US Dollar Index broke above its weekly range and touched its highest level since Christmas Eve at 97.82.

On Friday, Retail Sales data from Canada and the IHS Markit’s Manufacturing and Services PMI data from the US will be looked upon for fresh impetus.

Technical levels to consider