By Ketki Saxena
Investing.com -- The Canadian dollar edged higher against its US counterpart today, supported by a gain in crude prices on expectations that cuts by OPEC would continue through the end of 2023.
Meanwhile, the dollar edged higher against a basket of major currencies, ahead of tomorrow's US nonfarm payrolls.
Economic data today from the US was mixed, as the Core Personal Consumption Expenditure Price Index increased 4.1% to 4.2% annually in July, in line with expectations.
Meanwhile, Initial Jobless Claims declined to 228,000, below the expected 232,000, although Continuing Claims rose to the highest level in six weeks.
Trading was relatively muted as investors await major data from both the US and Canada tomorrow. While the US awaits nonfarm payrolls, Canadian investors will be awaiting domestic second-quarter GDP.
Analysts forecast GDP growth of 1.2%, down from 3.1% in Q1 2023, which could pressure the Bank of Canada to pause its interest rate hikes even as inflation remains above target.
The BoC is expected to keep rates at 5% at its next meeting on Sept. 6 and stay at that level through at least the end of March 2024, according to a Reuters poll.
The Bank of Canada's decision to hold rates at 5% is largely priced into the market and has contributed to the loonie's decline in August, which along with the slowdown in China has weighed on commodity-linked Canadian currency.
For the month of August, the Canadian currency is down 2.4%, marking its largest decline since February.
Reuters homeThe Canadian dollar edged higher against its U.S. counterpart on Thursday but the currency was still down sharply in August as a slowdown in China's economy pressured commodity-linked currencies.
For the month, the currency lost 2.4%, its biggest monthly decline since February.
On a technical level for the pair, analysts at FX Street note, "For guidance on the near-term outlook, it is important to watch how prices behave around the 1.3500 psychological level heading into the weekend. A rebound off this technical floor would likely attract new buyers, potentially leading to a revisit of this month’s peak. On further strength, the bulls may become emboldened to initiate a bullish assault on 1.3700, followed by 1.3850."
"In contrast, if USD/CAD breaches support at 1.3500 decisively, bearish pressure could gather force, creating the right conditions for a pullback toward the 200-day simple moving average. This technical indicator could stop sellers in their tracks, but in the event it doesn’t, it may be time for the bulls to throw in the towel ahead of a possible drop towards 1.3400."