The Canadian dollar remained moderately challenged in the morning session as traders became skeptical over the remedy suggested by the Organization of the Petroleum Exporting Countries. Despite the call of the cartel for a production cut, oil prices fluctuated, away from the recovery the previous week. The loonie remained volatile as the market participants wait for the upcoming economic data to be released before the week ends.
Extending the downtrend last Friday, the Canadian currency lost 0.05 percent in the morning session against the U.S. dollar. The greenback was supported by the upbeat U.S. data and kept on soaring against a basket of currencies.
As seen in the chart below, USD/CAD opened at 1.31143 and settled at 1.31217 around 10:00 UTC. The pair had an intraday high of 1.31227 and an intraday low of 1.31092. The pair came from a remarkable downfall, but before the week ended it ticked higher with the positive forecasts over the approaching economic data.
The pair is expected to find support at 1.30776 and resistance at 1.31787. It will likely remain at the current trading range with no sign of higher volatility coming. The band will unlikely contract nor expand as the candles stay below the moving average 1.31349. As far as the parabolic Sar is concerned, the dots apparently indicate an uptrend with three dots going upward.
Here’s the trend of the pair in different time frames:
The demand for the Canadian currency is highly watched before the trade balance data on Wednesday. This type of data usually affects the demand and supply for foreign exchange. In times of high demand, the prices tend to go up as well, thus, the currency will eventually appreciate. However, if the supply is higher, it only means that there is lesser demand for the currency and this may lead to price drops.
In July, the gross and domestic product of Canada went better-than-expected, spurring a strong signal for economic recovery. The increase of 0.5 percent on an annual basis and an advance of 0.6 percent compared to the prior month surprised the market analysts. With the support of a strong GDP and an upbeat demand, there’s a reasonable chance that the currency will touch the green territory soon.
Oil Prices Recover
The Canadian dollar has a strong trade-link with the trend of the commodities. Oil futures skid on Monday morning as traders became doubtful about the ability of the OPEC to solve the concerns over flooded market. Despite the agreement among the major oil kingpins, the production figures were still more than what the market needs.
A recent survey showed that the cartel’s production could reach up to 33.60 barrels per day in September. Although Saudi and Russia considered the output freeze, the implementation was still out of the context. These uncertainties still haunt the oil market and deliver more risks compared before.
On the other hand, the swing of oil prices was expected to halt before the end of the year. In the mid-session today, crude oil and brent found a breather- touching 0.91 percent and 1.02 percent increase. The gains are found to be marginal before the stockpiles and supplies data.