USD/CAD: Resiliency of Canadian dollar unlikely to last if USD recovery gains strength

USD/CAD fell as low as 1.3133 on Tuesday and closed on Friday at 1.3187 as the Canadian dollar retained its gains last week despite a general USD recovery. The market is waiting for the recovery, and the loonie is set to suffer if the USD continues gaining ground, FXStreet’s analyst Joseph Trevisani briefs.

Key quotes

“Technical considerations surrounding the current USD/CAD level have kept movement limited, in the absence of a fundamental change in the economic picture between the US and Canada. From July 2019 to March 2020 the CAD ranged from 1.3050 to 1.3350. The long residence in that space left numerous support and resistance limits, which flip from one to the other as the USD/CAD has fallen but keep their position.”

“Much depends on whether US data changes the perception that the American economy is slowing. The jump in initial claims in the latest week is one indication that it may be, on the other hand, the Markit PMI figures for August relate gathering activity. It is even possible, perhaps likely, that both pictures are accurate, that different areas and sectors of the economy are recovering at different speeds and may occasionally head in different directions.”

“A rise in oil prices would aid the loonie but its immediate fate will be determined by progress of the US economy.”