USD/CAD: Loonie Boosted by Risk-On Mood, But to Remain Rangebound In Near Term

© Reuters.

By Ketki Saxena 

Investing.com – The Canadian dollar continued to strengthen against its US counterpart today as oil prices and risk sentiment remained  on the uptick, reflecting in equities.

Crude prices meanwhile got a boost from concerns of supply, following a halt of 450K barrel exports from Iraq Kurdistan through Turkey, after an arbitration ruling confirmed that approval from Iraqi authorities was necessary to transport the oil.

The US dollar meanwhile beat a broad based retreat as receding banking fears weakened demand for the safe-haven, and expectations for the Federal Reserve remained in flux. Investors are betting the Fed is done hiking and will pivot on rates in the second half of the year to counter tighter credit conditions. 

On a technical level, analysts at Daily FX note,  "With a zone of confluency forming between 1.3600 and 1.370, the narrow range remains critical for the short and medium-term move. After a steep drop from the March high, the 1.3700 psychological level (coinciding with the 20-day MA) provided temporary support before stepping in as resistance, which currently remains intact.”

“If bears manage to gain traction and break support, a retest of 1.3600 is possible, with the next level of Fibonacci support (78.6% retracement of the 2011 – 2016 move) coming into play at 1.356.”

Looking ahead for the pair, analysts at Scotiabank (TSX:BNS) note that the pair should continue to trade range bound, with gains - but also losses - on the loonie remaining limited in the near term. 

The analysts note, Material gains in the CAD still look like a struggle but I also feel that the CAD is unlikely to fall too far at the moment, with a lot of bad news already factored in.”

“While the CAD is finding it very hard to make material gains, the pattern of short-term trade since mid-March has been one of (very) mild improvements in the CAD tone. Still, broader range trading seems likely to persist for now.”