By Ketki Saxena
Investing.com – The Canadian dollar weakened against its US counterpart today, and as the greenback bounced from a one year low following US retail sales data. The data indicated that while the US economy is slowing, it may not be doing so at a pace that will stop the US Federal Reserve from raising rates in may.
Following the data, futures showed an over 80% chance of a rate hike from the Fed in May, rising from a just under 70% chance prior to the data.
However, the Canadian dollar closed the week on a positive note, buoyed by crude prices after the EIA said it expects record demand this year, driven by the China reopening and OPEC+ production cut.
Analysts at Scotiabank (TSX:BNS) also noted that, on a fundamental level, the Canandian dollar looks undervalued, particularly as “easonal patterns are CAD-supportive (and USD-negative generally) through April specifically (and more generally through Q2/Q3)”
The analysts also note that “ positioning against the CAD across a spectrum of investors (short-term, speculative money and longer-term real money) has become somewhat extreme, according to the CFTC Commitments of Traders Report which have showed a rapid accumulation of CAD shorts since mid-March”
On a technical level for the pair, analysts at FX Street note, “Given the backdrop, the USD/CAD found some bids before the weekend, though the upward correction toward the 200-day Exponential Moving Average (EMA) at 1.3377 could be short-lived.”
“ If USD/CAD buyers reclaim the 200-day EMA, that will expose 1.3400 and could shift the pair’s bias to neutral, with a daily close above the latter. Otherwise, USD/CAD sellers might step in and drag prices towards the YTD low at 1.3262, ahead of falling to 1.3200.”