By Ketki Saxena
Investing.com - The Canadian dollar was little changed against its US counterpart today, moving between losses and gains through the day, before posting a moderate loss at the North American close.
There was little major action to spur the pair today, and trading remained thin.
The US dollar weakened against a basket of currencies, as investors continue to price in rate cuts from the US Federal Reserve after next week’s policy meeting - where the Fed is expected to hike rates another 25 bps. Following this rate hike however, rate futures markets are forecasting roughly 50 bps of rate cuts by year end.
The Canadian dollar meanwhile was pressured by risk-aversion as equities remained under pressure. The loonie however did gain some support from crude prices, as investor optimism grows around expected travel during China’s upcoming May Day holiday, expected to boost demand from the world’s largest importer of crude.
On a technical level for the pair, analysts at FXStreet note, “With bullish inertia on its side, USD/CAD could extend its recovery in the coming days and defy resistance at 1.3570/1.3580, an area where the 50-day simple moving average converges with the 50% Fibonacci retracement of the March/April slump. The pair may struggle to breach this barrier, but if a breakout materializes, a rally toward trendline resistance at 1.3650 could follow.”
“On the other hand, if sellers return and trigger a pullback, initial support stretches from 1.3515 to 1.3485. A decisive break below this floor could embolden bears to launch an attack on the 200-day simple moving average, located slightly above the psychological 1.3400 mark. In the event of additional weakness, attention would shift south towards this year's low at 1.3302.”
On a fundamental level for the pair, analysts at Scotiabank (TSX:BNS) note that “CAD weakness last week reflected some deterioration in factors which had previously been more CAD-supportive (yield spreads and energy prices specifically). USD gains through the mid 1.34 zone has tilted risks towards the USD remaining firm in the short run at least. However, the broader range in funds that has prevailed over the past few months is very likely to remain intact.”
It’s also worth noting that traders have pared back bearish bets on the loonie. Data from the U.S. Commodity Futures Trading Commission showed that as of April 18, net short positions had decreased to 46,233 contracts from 56,579 in the week prior.