USD/CAD drops on US Dollar strength, amidst falling oil prices

• The USD/CAD slid on market sentiment and high oil prices.
• An offered US Dollar would keep the USD/CAD under heavy stress, as the USD/CAD eyes 1.3500.
• USD/CAD Price Analysis: Would continue headed downwards unless buyers conquer 1.3600.

The Canadian Dollar (CAD) extended its gains against the US Dollar (USD) for three straight days, spurred by a risk-on impulse and overall US Dollar weakness. The buck is pressured on expectations for a less hawkish US Federal Reserve (Fed). The USD/CAD is trading at 1.3569 after printing a high of 1.3616.

Canadian Dollar boosted by high oil prices, risk appetite and soft USD

The USD/CAD continued its fall on higher oil prices, as Western Texas Intermediate (WTI) rose more than 6% weekly. Canada is one of the world’s major crude oil and natural gas exporters. Therefore, higher energy prices it usually underpins the Canadian Dollar.

Additionally, a softer US Dollar gave another leg-down to the USD/CAD pair, as it’s falling to a three-week low. However, the US Dollar Index (DXY), a barometer for the greenback’s value vs. a basket of six currencies, has paired some of its losses, gains 0.23%, at 102.665.

Traders should be aware that the Canadian Dollar, as a risk-perceived currency, would be subject to weakening on geopolitical tensions rise or sentiment shifts. As long as investors’ mood remains upbeat, the USD/CAD has room for another leg down, and it might test the 100-day Exponential Moving Average (EMA) at 1.3520.

Data-wise, the US economic docket featured Pending Home Sales for February, which rose by 0.8% MoM, above estimates for a plunge of 0.3%. Annually based, it decreased by 21.1%, less than the 29.4% plunge foreseen.

On the Canadian front, the docket featured the Bank of Canada (BoC) Deputy Governor Toni Gravelle. Gravelle did not speak about monetary policy; thought commented the BoC is ready to step in, if the banking system comes under pressure. He added that the BoC’s Quantitative Tightening (QT) program would run its course by the first half of 2025.

USD/CAD Technical analysis

USD/CAD remains downward biased after dropping below the 50-day Exponential Moving Average (EMA) at 1.3594. a drop below 1.3550 will expose the 100-day EMA at 1.3520, ahead of testing 1.3500. Once cleared, a support trendline at around 1.3420/30 could be tested before retracing to 1.3400.

On the other hand, the USD/CAD buyers reclaiming the 50-day EMA at 1.3594 could pave the way to test 1.3600, followed by the 20-day EMA.