USD/CAD Forecast: 1.39 Zone Tested as Oil Slide aand Data Risks Collide
USD/CAD has been stuck in a tough spot during the European session unable to make a clear move in either direction, but still finding...
Quick overview
- USD/CAD is currently trading in a tight range around 1.38 - 1.39, facing pressure from falling oil prices and a cautious US market.
- The upcoming US employment data is keeping the dollar's movement in check, with expectations of a modest job recovery.
- Crude oil prices have dropped due to potential increased supply from Venezuela, negatively impacting the Canadian dollar.
- Technical analysis suggests USD/CAD may face hurdles in recovery, with a potential long position recommended around 1.3820.
USD/CAD has been stuck in a tough spot during the European session unable to make a clear move in either direction, but still finding support near that 1.38 – 1.39 zone. A weaker greenback typically would have been enough to send USD/CAD lower, but with oil prices dropping, the Canadian dollar’s usual buyers have been harder to come by. The fact that crude prices have taken a hit due to fresh supply news out of Venezuela means that the Canadian dollar isn’t in any hurry to attract buyers.
US Data Watch Keeps the Dollar in Check
Traders in the US are feeling cautious about the upcoming data dump which has kept the dollar from gaining any real traction. Wednesday’s ADP Employment report (which is expected to show a recovery of about 45,000 jobs after that big decline of 32,000 in November) is one of the key things being watched. Another report due out on the same day, the JOLTS Job Openings number, is forecast to be slightly lower at 7.64 million, and the ISM Services PMI is expected to be 52.3. While the numbers still suggest expansion, some softer outcomes could start to make people think that the US economy is starting to slow down, which could limit the dollar’s upside and leave USD/CAD stuck in a tight range.
Oil Prices and Venezuela News Hammer the CAD
The Canadian dollar hasn’t found much let up from the energy markets either. Crude prices fell after Donald Trump suggested the US might import up to 2 billion dollars’ worth of oil from Venezuela. The prospect of even more supply weighing on prices caused some selling, even though some analysts pointed out that actual volumes might not be as big as first thought. Still, the headlines were enough to put some pressure on the CAD, and prevent USD/CAD from slipping very much even with the dollar being softer.
USD/CAD Technical Outlook: Recovery Still Faces Big Hurdles
Looking at the charts, USD/CAD is currently sitting near 1.3879 after rebounding from that sharp selloff that followed the peak at 1.4130. The price has bounced back into the 1.3880 – 1.3950 zone, which is a key area where previous resistance levels and the 38.2-50% Fibonacci retracement of the decline from November to December come together.
More recently, we’ve seen some strong bullish candles up till 1.3945, but they’ve been somewhat capped by selling – which is a good sign that buyers are active but running into trouble getting to a higher price. The overall structure still looks like a corrective pullback within a bigger uptrend, and the long-term trendline near 1.3645 still looks pretty solid. RSI has come back up from some very oversold levels and is now at the middle-of-the-range, which suggests we’re not seeing a lot of momentum right now.
Trade idea: Try to pick up a long position around 1.3820, target 1.4010, but set a stop just below 1.3750.
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