The last 3 months haven't been the best for the Canadian dollar. An uptrend was formed in favor of the USD because it was a period of decline in oil prices and investors running from risky assets. The economic slowdown in China and the impending wave of the pandemic have left almost no chance for commodity assets, including CAD.
On the chart, we can see more than a price correction, but a trend reversal. A new uptrend has every chance to continue. Nevertheless, the past week has been very successful for the Canadian dollar. Despite the disappointing results of the Bank of Canada meeting, at which the regulator left monetary policy unchanged, the Canadian dollar received support due to the rise in oil prices, as well as good news from China, where the growth of the trade surplus was recorded above forecasts. CL/WTI crude oil still remains near the $ 70 mark. The reduction of oil reserves in the United States and the shutdown of three-quarters of oil platforms in the region due to hurricanes causes a shortage of black gold in the United States. But oil is not the only reason for the strengthening of the CAD this week: good employment reports confirm the strength of the Canadian economy: unemployment fell to 7.3% in August.
The US dollar can count on support, in anticipation of investors raising the rate in the distant 2023, and of course in connection with the economic recovery. The report on the labor market published this week allowed us to breathe a sigh of relief after the terrible data a week earlier. The number of applications for unemployment benefits fell to the lowest for the entire period of the pandemic.
Next week, the focus will be on inflation in the US and Canada, industrial production output in China and the weekly report on the US labor market. Will the Canadian dollar find enough incentives to confront the USD? - In the short term, yes. Most technical analysis tools confirm the effectiveness of short trades. At the same time, we note that the support factors for the Canadian dollar are temporary. Oil supplies to the United States will recover after the hurricanes, oil prices will begin decreasing, and the pandemic will gain momentum as the cold winter period begins in Europe, Canada and the United States. Therefore, in the long term, our choice are the deals to BUY, but during the week, you can still benefit with SELL deals.
