USD/CAD: Loonie Continues to Climb; Approaches 100 Day Moving Average

© Reuters.

By Ketki Saxena 

Investing.com – The Canadian dollar continued to strengthen against its US counterpart today, boosted by resolutely positive risk sentiment as banking fears remained on the backburner. 

The commodity linked Canadian dollar was also supported by gains in crude as US inventories remain low, supply concerns around pipeline flows in Iraq grow, and as Russia announced a smaller than expected production cut. 

 The US dollar meanwhile remained on the backburner as labour data came in hot, reinforcing investor hopes for a pause or pivot from the US Federal Reserve at its next meeting. 

Initial Jobless Claims for the week ending on March 25 rose 198K, above estimates of 196K. The US GDP Q4 2022 final reading also came in today, tick below 2.7% estimates, at 2.6%. 

On a technical level, analysts at FXStreet note, “ The USDCAD is approaching the 100 day MA at 1.35142. The low price just reached 1.3519. The 100 day MA closed below the 100 day MA last on February 20…. The low prices today have seen that so far today, but the bounces off the low have been limited as well with the corrective highs staying below the swing area between 1.3553 to 1.35597.”

“It would take a bounce above that area to give the dip buyers more confidence that the low may be in place. Although the sellers are still in control, there still could be dip buyers leaning. However, if the 100 day MA is broken, be aware for buyers to turn to sellers.”

On a fundamental level, analysts at Scotiabank (TSX:BNS) warn that the CAD’s gains may be related to short term month end flows.

“However, if you combine (relatively extended CAD-bearish) positioning, valuation considerations, CAD-positive seasonals, some (developing) technical momentum and throw in the narrowest WCS/WTI spread in nearly a year and the idea of CAD gains having some sticking power is not so far-fetched.”

“A positive risk backdrop adds to the bullish backdrop for the CAD too.”