Buying USD/CAD After the Dive Stalls at 1.36
USD/CAD has been showing incredible resilience and made decent gains for more than a month, despite increasing Oil prices, which should have helped the CAD. However, the spread between the 2-year bonds in the United States and Canada has widened in favor of the US treasuries, which has had the effect of pushing up USD/CAD. This widening spread has been particularly notable since May, and currently, the correlation coefficient between the 2-year spread and the USD/CAD stands at 64% which is not bad.
The slump in the Canadian economy has also been keeping this pair bullish. On Friday, several economic indicators in Canada showed less favorable results. Canadian GDP posted a decline of -0.2% month-over-month, contrasting with the previous figure of 0.2% growth. Additionally, the manufacturing Purchasing Managers’ Index (PMI) dropped to 48 points, down from the previous reading of 49.6 points. Concurrently, Canadian unemployment is gradually increasing and reached 5.5%. In response to these developments, the Canadian 2-year note recorded a decline of 2.02% on Friday, which sent this pair around 1 cent hgiher.
Today we saw some more bullish momentum, as the USD pushed higher after the stagnation yesterday, while crude Oil was retreating lower. USD/CAD started the day with upward momentum, distancing itself from the key resistance level at 1.3600 and pushing up to the next target of 1.3670-80 where it reversed down, after Saudi Arabia announced further Oil production cuts.
The price dived to 1.36 lows again, but it seems like this level is holding as support now. So, we decided to open a buy USD/CAD signal a while ago, after going long on crude Oil earlier and booked profit soon after. The most recent report indicated that the unemployment rate has risen once more while the data on Canadian Retail Sales and GDP have fallen short of expectations, suggesting a slowdown in the economy. As a result, the Bank of Canada (BoC) meeting is tomorrow, but the market consensus is that they will likely keep interest rates unchanged. So, we are long on this pair now.
USD/CAD Live Chart
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