Let’s take a look at the fundamental picture for USDCAD. The American dollar is currently losing strength amid geopolitical de-escalation, while its Canadian counterpart keeps gaining support from elevated oil prices.
The heated standoff between the United States and Iran remains center stage. Numerous attempts to reach a peace agreement and a shift toward a diplomatic way of resolving the conflict have weakened demand for the greenback as a safe-haven asset.
Meanwhile, fuel retreated from recent peaks, but not by much, due to ongoing supply disruptions. As an energy-linked currency, the loonie benefits from Canada’s high export volumes. In the coming days, the International Energy Agency (IEA) is set to release its monthly report. These figures could inject volatility into the oil market in general and the pair in particular.
The US Producer Price Index (PPI) is due today. Inflation readings are expected to surge to 1.2%, up from the previous 0.7%. If the data come in even higher, the greenback will probably receive another boost, as the Federal Reserve (Fed) may be forced to adopt a more hawkish stance.
Speaking of central banks, we have to mention a notable monetary divergence between the US and Canada. American borrowing costs are expected to sit within the same range of 3.50%–3.75% at the next meeting. Canada is likely to keep them unchanged at 2.25%—well below the Fed’s level. Steady interest rates in the Great White North, coupled with signs of a recovering labor market (the March report showed employment growth of 14,100), are now limiting the CAD’s downside.
Meanwhile, Prime Minister Mark Carney secured a parliamentary majority following Monday’s developments, reducing domestic political uncertainty and underpinning the national currency.
The overall recommendation is to sell USDCAD if prices return to 1.38140. Profits should be taken at 1.37550. Stop Loss could be set at 1.38500.
The volume of the open position should be calculated so that the potential loss (protected by a Stop Loss order) does not exceed 1% of your deposit. If your account balance does not allow opening a position of this size, it is better to avoid entering the market on this signal and wait for other trade options that meet low-risk criteria.
This content is for informational purposes only and is not intended to be investing advice.
