By Ketki Saxena
Investing.com -- The Canadian dollar snapped six days of losses against the USD today, driven by CAD strength as equities and crude prices rallied. The loonie just managed to outpace strength in the USDa s investors continue to buy into the safe haven greenback, with worries of a recession remaining dominant.
US data showed that GDP expanded less than estimates, and that unemployment claims rose less than forecast, but Fed pricing was little changed with bets for a 25 bps move baked in for May even as treasury yields rose. Worries of a banking crisis, as First Republic Bank appears on the brink of failure, also supported the safe-haven greenback.
The Canadian dollar was supported by gains in crude, as the commodity recovered from yesterday’s brutal (4%) selloff following comments from the Russian deputy prime minister that more production cuts are not needed.
Canadian employment meanwhile beat expectations again, with 62,000 jobs added in February as the labour market remains robust. Tomorrow’s domestic GDP data is expected to show the economy grew at 0.2% and will provide further insights on the Bank of Canada’s path forward.
The Bank’s meeting minutes released yesterday showed that the BoC does not believe that cutting rates this year is the most likely path forward - though this is something markets are pricing in, and serving as a headwind for the loonie. On a technical level for the pair, analyst at FX Street note, “The USD/CAD is upward biased. However, an evening star three-candlestick pattern is emerging, which could pave the way for a pullback before resuming the uptrend.”
“Hence, [as] USD/CAD drops below 1.3600, a dip towards the confluence of the 20 and 50-day EMAs at 1.3526/35 is on the cards. Once cleared up next is the 100-day EMA at 1.3509. Conversely, if USD/CAD holds the spot price above 1.3600, upside risks lie at April 26, high at 1.3651.”
On a fundamental level for the pair, analysts at Scotiabank (TSX:BNS) note that despite its marginal gains today, “The CAD is still finding it hard to come out from under the USD’s shadow amid softer crude oil prices—and commodities more generally—and steady short-term rate spreads. “