- Oil price recovered on Tuesday after a 6% decline in the previous session.
- The US announced plans to buy about 3 million barrels of oil.
- The US will release figures on employment and GDP.
The USD/CAD price analysis suggests a rebound in the Canadian dollar as oil prices rise. However, the loonie has had a terrible month with weak economic data and a massive BoC rate cut. At the same time, the greenback paused its rally as market participants waited on the sidelines for key data and the US presidential election.
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Oil prices recovered on Tuesday after a 6% decline in the previous session. The rebound came after the US announced plans to buy about 3 million barrels of oil for its Strategic Petroleum Reserve. Canada is a net exporter of oil, so a rally in oil boosts the loonie.
Nevertheless, the currency has had a difficult month as Canada’s economy deteriorated. At the same time, inflation eased more than expected, pushing the Bank of Canada to implement a significant rate cut. If the trend continues, the BoC will remain its peers’ most dovish central bank.
Meanwhile, the Fed has assumed a more cautious tone. Policymakers are less dovish after a series of better-than-expected economic reports. Moreover, inflation came in higher than expected in September. Consequently, markets are pricing a higher chance of a small rate cut in November.
However, incoming data might change this outlook. This week, the US will release figures on employment and GDP. Economists expect a growth of 3.0% in the third quarter. Meanwhile, job growth might slow down from the previous month. Upbeat figures will lower the likelihood of a rat cut, while downbeat data will solidify rate-cut bets.
USD/CAD key events today
- CB Consumer Confidence
- JOLTS Job Openings
- BOC Gov Macklem Speaks
USD/CAD technical price analysis: Bearish RSI divergence
On the technical side, the USD/CAD price is pulling back after reaching the 1.3901 resistance level. However, the bullish bias remains intact since the price trades above the 30-SMA with the RSI above 50. USD/CAD has remained in a bullish trend since bulls took charge at the bottom of the 4-hour chart.
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However, momentum started declining after the uptrend hit the 1.3825 resistance level. The RSI made a bearish divergence that could lead to a reversal. However, bulls might push for a new high above 1.3901 if the SMA holds firm.
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