USD/CAD to 1.30?

USD/CAD to 1.30?

USD/CAD to 1.30?

USD/CAD traded sharply lower on Friday following stronger than expected Canadian GDP growth and weaker U.S. data. Looking ahead many investors are wondering if USD/CAD will fall further and extend its losses to 1.30. Fundamentally, we believe that oil has bottomed and the CAD should strengthen but we prefer selling USD/CAD at the top of its range rather than the bottom. There are no major Canadian economic reports until next Friday when labor and manufacturing data will be released. Canada reported strong job growth in August with a particularly healthy increase in full time work so we would not be surprised by some payback in September. As for oil, while OPEC’s decision to cut production is a significant one, some investors expressed skepticism about the actual execution and the subsequent effect the deal would have on the supply. The issue at hand is that output levels have not been strictly defined for OPEC countries and even when the levels are defined, the effectiveness of OPEC comes into question.

Technically there’s quite a bit of support below current levels. Friday’s decline took the pair right to the 20-day SMA but below there we have the 50-day SMA at 1.3050 and then 1.3000 sits right at the 100-day SMA. However as long as USD/CAD holds below the September high and 200-day SMA at 1.2370.

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