USD/CAD recovers from three-day losses approaches 1.2600
- The Canadian dollar is up for the first time this week.
- US dollar weakness weighs on the USD/CAD pair.
- Good US economic data could not stop the Canadian dollar rise.
The USD/CAD is sliding in the session. The pair is trading around 1.2643, down 0.38%, as market sentiment improves. The commodity-linked currencies are gaining between 0.18% and 0.35%, while major US indices are rising and US dollar retreats across the board.
The loonie is up 0.30% in the mid-American session despite its strong correlation to oil prices. WTI is down 0.25% on Thursday.
On Wednesday, the Bank of Canada kept its overnight rate unchanged and maintained its bond purchasing program at CAD 2 billion per week. Though this was seen as dovish for the market, with the Canadian dollar weakening, the main driver is now the greenback’s behavior.
Regarding the US economic docket, the US Initial Jobless Claims for the week ending on September 3 came at 310K against 335K expected by analysts. Its 4-week moving average decreased from 356K to 339.5K.
The improvement in the labor market is attributed to an acceleration of the vaccine rollout and higher workers’ demand amid easing lockdown measures. Though the claims diminished, most economists expect slower economic growth by the third quarter.
USD/CAD Price Forecast: Technical outlook
The daily chart shows that the USD/CAD is in an uptrend. However, today’s price action is tilted to the downside. A daily close under 1.2688 could form a candlestick-chart pattern known as a dark-cloud cover. Such an outcome could pave the way for further losses. The first support would be the 100-day moving average (DMA) at 1.2563. Once the latter is cleared, the next support would be the 200-DMA at 1.2524. A sustained break beneath that level could target would be July 6 low at 1.2302.
On the flip side, the bulls would need a daily close above 1.2700, so they could reclaim control. In that case, the first supply area would be September 3 high at 1.2762. A clear break of the latter could expose key resistance levels at July 19 high at 1.2807 and August 20 high at 1.2949.
The Relative Strenght Index is at 52.89, while it remains above the mid-line suggesting a bullish bias, it is aiming lower, so caution is warranted.