The USD/CAD pair tried several attempts to resist above the 1.30 handle in early Asian market hours, but in vain as the bears regained control and dragged the pair back to 1.296 handle. The spot extends its consolidation mode near seven-week lows into a sixth day today, although remains poised for further downside, in the wake of the recent bullish momentum seen around oil prices, which will keep the resource-linked Loonie buoyed. Oil prices caught a fresh bid-wave following reports that the US sanctions on Iran took effect earlier today. This helped the CAD to extend the gains below the 1.30 handle. Meanwhile, a broadly subdued US dollar offers little help to stall the renewed selling in the major.
Investors Focus on NAFTA as Crude Oil Price Boosts Loonie
On Monday, USD/CAD jumped to 1.3040 levels following reports that Saudi Arabia froze new trade and investment and expelled the Canadian ambassador in retaliation for Ottawa’s call to free arrested Saudi civil society activists. However, the spike was reversed after the US dollar corrected sharply from more-than two-week tops versus its main competitors. The dollar’s weakness is having a bit of a breather at the moment, and it is a timely one if you look at the USD/CAD hourly chart. The pair’s decline today appears to have stalled in the region of support from last week’s low between the 3 August low and the 1 August low. The range there is 1.2968 to 1.2976. For now, these near-term support levels is where buyers are leaning on to defend price from falling further in the session.
But the main driver for the Loonie will still be NAFTA talks and a deal may be closer than one would think – so that could be another tailwind for the Canadian dollar moving forward. However, with all things political it is not done until it is done. Investors are waiting for official results before seeing any real price action as a result as recent news indicated US & Mexico moving forward with deal while leaving out Canada which could negatively affect Canadian economy. Looking at the pair from technical perspective, the pair has moved well below 20, 50 & 100 day moving average and RSI indicator is at 34 & 39 in 4 hour and daily chart and the indicator line continues to move towards oversold region supportive of continued downside movement for USDCAD pair in near future. Expected support and resistance for the pair are at 1.29659 / 1.29484 and 1.30075 / 1.30388 respectively.
This article was originally posted on FX Empire
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