CANADIAN DOLLAR PRICE OUTLOOK: USD/CAD SELLOFF SUBSIDES AS GBP/CAD & NZD/CAD EXPLODE
- USD/CAD selling pressure stabilizes as the Canadian Dollar edges lower with crude oil prices
- GBP/CAD price action rocketed higher on Wednesday largely due revived Brexit negotiations
- NZD/CAD has potential to extend even higher if key economic data due for release permits
The Canadian Dollar came under fire during Wednesday’s trading session. Loonie weakness looks partly driven by disappointing Canada retail sales released in the morning, which crossed market wires with a 0.4% month-on-month increase for August compared to the 1.1% rise expected and 0.6% gain reported previously. A notable drop in crude oil prices could broadly explain Canadian Dollar downside as well owing to their typically strong inverse correlation. A pause to the sharp slide set forth by USD/CAD price action recently also seems to follow relatively more tepid US fiscal stimulus hopes.
USD/CAD PRICE CHART: DAILY TIME FRAME (03 JUL TO 21 OCT 2020)
USD/CAD caught a bid after colliding with the 1.3100-price level. This area of technical confluence is underpinned by last week’s low in addition to the 76.4% Fibonacci retracement of September’s trading range. USD/CAD might have a little more room to extend its relief bounce, but a bearish trendline extended through the series of lower highs notched this month could undermine rebound potential. The 1.3200-handle also stands out as an intimidating zone of technical resistance.
Although, eclipsing this technical barrier, perhaps catalyzed by a breakdown in US fiscal stimulus talks, could open up the door for USD/CAD bulls to make a quick push toward the 1.3400-price level. On the other hand, dropping below the 1.3100-mark again might indicate a resumption of USD/CAD selling pressure with the 31 August swing low standing out as a potential downside target.
GBP/CAD PRICE CHART: DAILY TIME FRAME (01 JUN TO 21 OCT 2020)
GBP/CAD price action ripped higher on Wednesday in large thanks to revived Brexit negotiations. A positive reaction by the Pound Sterling to the latest Brexit development helped send spot GBP/CAD on a 275-pip surge to the strongest level in three-weeks. GBP/CAD now trades back above its 200-day simple moving average, which could open up the door to bullish continuation.
This might be facilitated by Bollinger Band width expansion as was witnessed late July. That said, monthly PMI reports due for release later this week could bolster the Canadian Dollar relative to its Pound Sterling peer if the leading indicator highlights a marked deterioration in UK economic activity amid the reimplementation of stringent coronavirus guidelines.
NZD/CAD PRICE CHART: DAILY TIME FRAME (21 MAY TO 21 OCT 2020)
NZD/CAD prices also jumped on Wednesday as the Kiwi pivoted higher against the Canadian Dollar. The 200-day simple moving average provided a springboard for NZD/CAD price action once again as it has multiple times this year. Positive divergence suggested by the MACD indicator points to another encouraging technical development for NZD/CAD bulls.
The 50-day SMA might thwart a sustained advance, but surmounting this barrier of resistance could clear the way for NZD/CAD to extend higher toward its negatively-sloped trendline connecting the 31 July and 18 September swing highs. That said, the DailyFX Economic Calendar details high-impact event risk on the docket posed by the upcoming release of New Zealand inflation data, which has potential to strong-arm the direction of NZD/CAD.
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