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Home.forex news reportUSD/CAD Price Analysis: CAD Strengthens as Oil Recover

USD/CAD Price Analysis: CAD Strengthens as Oil Recover

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  • 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

USD/CAD technical price analysisUSD/CAD technical price analysis
USD/CAD 4-hour chart

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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