By Ketki Saxena
Investing.com -- The Canadian dollar strengthened against its U.S. counterpart today, rebounding from its lowest level in more than two years last week. The US dollar weakened across the board as weaker than expected U.S. and global economic data stoked bets that the Fed may be forced to temper its monetary policy tightening going forward.
Beyond broad based US dollar weakness, the commodity linked loonie was also supported by a rally in oil prices as as OPEC+ mulledreducing output by over 1 million barrels per day (bpd) as it seeks to support oil prices.
At 5 p.m ET, the USD/CAD pair was trading at C$1.3621 to a greenback, down 1.48% in the day’s trading, and with the day’s range of 1.3620 - 1.3830.
The dollar was pressured today by negative economic data both globally and in the U.S., as investors bet the world’s most powerful central bank would be forced to slow its aggressive tightening of monetary policy in order to avoid triggering an extreme recession. Global economic data including Purchasing Managers Indices reflecting a downturn or slowdown in economies including the EU, Britain, China, India, and Japan, while U.S. data reports showing manufacturing activity that saw an unexpected contraction, and construction activity was worse than feared.
Canada’s S&P Manufacturing PMI improved but stayed at a contractionary level, signs of an ongoing economic slowdown blamed on elevated interest rate. The data also indicated easing inflationary pressures, and Canadian yields, unlike their retreating U.S. counterparts, remained mixed.
Despite the loonie’s rally today, overall, the uptrend for the USD/CAD pair remains in place, even though the pair’s rise has slowed as the market consolidate.
On a technical level, analysts at Credit Suisse (SIX:CSGN) write that “Resistance is seen at the highs from last week at 1.3832/38, which we look to be broken to reassert strength and trigger a move to 1.4097 – the 78.6% retracement of the 2020/21 downtrend”.
Looking ahead, the pair is likely to take direction from Bank of Canada Governor Tiff Macklem’s speech on Thursday, Canadian jobs report for September due Friday. The US economic docket will feature Durable Good Orders alongside JOLTs Job Openings on Tuesday, and Friday’s Nonfarm Payrolls data for September.