- USD/CAD extends its weekly downtrend and falls to more than three-month lows on Friday.
- Bullish oil prices benefit CAD and put pressure on the pair amid subdued USD demand.
- The oversold RSI on the 1-hour chart warrants some caution before opening aggressive bearish positions.
USD/CAD remains under pressure during Friday’s European session, trading near the lowest level since July 6 around 1.2350.
The crude oil price has remained stable
Crude oil prices expect to stay near multi-year highs in the coming months due to tightening supply. In turn, this has supported the Canadian dollar. A currency whose price movements are tied to commodity prices. Which consequently has been a major headwind to the USD/CAD pair amid subdued USD price levels.
Despite Wednesday’s slightly stronger US CPI report, the dollar has corrected from 13-month highs as investors remain unconvinced about a sustained period of inflation. US Treasury yields have fallen sharply, which has put pressure on the USD.
In addition, markets appear to have fully discounted in price the prospect of an early tightening of monetary policies by the Fed. Combined with the prevailing risk appetite, this has prevented investors from opening new bullish positions around the safe-haven USD. The USD/CAD has been affected by this factor as well.
According to technical indicators, the previous day’s break below the 1.2400 level has confirmed a bearish break of the lower boundary of a short-term descending channel. This may have already set the stage for further losses, although an oversold RSI on the 1-hour chart warrants some caution before opening aggressive bearish positions.
Now the market is watching for U.S. retail sales figures later in the session. Along with US bond yields, this will influence the USD and provide some momentum to the USD/CAD pair. Investors will also take cues from oil price dynamics for some short-term opportunities.