USD/CAD continues dipping. Follow US jobless claims and the speech of Fed’s Powell!
USD/CAD dropped to January’s levels
2020-08-27 • Updated
USD/CAD reached levels unseen since the beginning of the year. ING considers the pair may fall further, but Bank of America warned that it may hit its bottom and reverse in the long run.
As you may know, the Canadian dollar is positively correlated with oil prices. When the oil market is on the rise, the loonie is in high demand, too. Yesterday, WTI oil’s price surged to the levels unseen since early March. According to Bloomberg, the hurricane in Mexico forced oil refineries to shut down and stop oil production. In addition, ING points to Russian oil cuts to the lowest levels in almost ten years. The leap of oil prices should push the CAD upper. Watch out today’s report of US crude oil inventories at 17:30 MT time! They may have an impact on the oil market.
Bank of America is confident that the recent euphoria about the global recovery soon is gone, and investors have become more realistic. They weigh more on possible risks and slower economic rebound. They forecast that USD/CAD may return to 1.3700 during this quarter and to 1.400 at the end of the year.
Unlike Bank of America, ING is quite confident that the pair will keep declining and may reach the area of 1.2500-1.2600 in the first half of 2021. Besides, they emphasize that the Canadian dollar has been performing worse than other currencies of G10. It has happened because of the close dependence from the US economy. Investors were worried about that amid the second virus wave. However now, when the infections curve is declining, those doubts are waning. Therefore, the Canadian dollar has all chances to catch up the lost ground.
USD/CAD has been trading in the descending channel since late June. ING believes there is more room for a further fall of the loonie. Bank of America allows that the consolidation may continue until the pair reaches the strong support of 1.3000, which should be the point of reverse.
If the price breaks down the support of the low of January 23 at 1.3120, it will fall deeper to the next support of 1.3045. Otherwise, the move above the recent high of 1.3215 will drive the price to the next resistance of 1.3300.
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