By Ketki Saxena
Investing.com -- The Canadian dollar weakened to a near four-week low against the greenback, as Fitch downgraded the United States credit rating from AAA to AA+ from AAA
The downgrade sparked a sell-off in risk assets including equities, crude oil, and the commodity linked Canadian dollar.
In short, "Everything that could go wrong with the loonie is going wrong today", as noted by Marc Chandler, chief market strategist at Bannockburn Global Forex LLC.
Crude prices fell despite a report from the EIA showing that U.S. crude stocks fell in the week by 17 million barrels, the largest drop in U.S. crude inventories ever recorded (with records dating back to 1982).
Meanwhile, the safe-haven US dollar rallied against a basket of currencies as investors fled to less risky assets.
The US dollar was also supported by a larger-than-expected increase in U.S. payrolls. ADP non-farm payrolls recorded an increase of 324,000 in July, fr higher than the expectation for an addition of 189,000 jobs but lower than the revised figure of 455,000 in June.
On a technical level for the pair, analysts at FX Street note that "the USD/CAD maintains a bullish outlook for the short term, as observed on the daily chart. The Relative Strength Index (RSI) is comfortably positioned in the positive territory above its midline.""Additionally, the pair is above the 20-day Simple Moving Average (SMA) but below the 100 and 200-day SMAs, suggesting that despite the recent bearish sentiment, the bulls are still resilient, holding some momentum."
Analysts at Forex.com note that resistance levels are at 1.3385 (July’s high), 1.3407 (100-day SMA), 1.3455 (200-day SMA), while support is at 1.3280, 1.3250, 1.3240.