The USD/CAD currency pair extended its overnight recovery rally and kept gaining its positive traction near 1.3080 level, mainly due to the broad-based U.S.U.S. dollar strength backed by the upbeat U.S.U.S. manufacturing data, which eventually boosted the hopes of U.S.U.S. economic recovery.
On the other hand, the modest upticks in the oil prices in the wake of the larger-than-expected draw in crude oil inventory becomes the factor that capped further upside momentum in the currency pair. Moreover, the bullish sentiment around the crude oil prices was also supported by the better-than-expected U.S.U.S. manufacturing activity data and the Upbeat China and Japan data, which boosted the hopes of global economic recovery and helped the crude oil prices.
Currently, the USD/CAD currency pair is currently trading at 1.3071 and consolidating in the range between 1.3051 - 1.3084. Moving on, the traders seem cautious to place any strong position ahead of the Candian Labor Productivity q/q data.
The market risk sentiment has been flashing green since the day started, backed by multiple factors. Be it the hopes of coronavirus vaccine or the upbeat data from the U.S.U.S., China, and Japan, these all factors have been supporting the market trading sentiment. At the data front, the August's ISM Manufacturing Purchasing Managers Index (PMI) increased to 56, against July's reading of 54.2 and the 54.5 forecasts. A surge in new orders recorded the index climb to its multi-year high. At China's front, the Caixin manufacturing PMI for August increased to 53.1 from 52.8 in July. Likewise, Japan's manufacturing PMI rose to 47.2 in August from 45.2.
This, in turn, the broad-based U.S.U.S. dollar succeeded in gaining positive traction on the day. However, the U.S.U.S. dollar gains seem rather unaffected by the upbeat market tone and held its gaining streak, at least for now. Thus, the modest gains in the U.S.U.S. dollar could be considered as the major factor that kept the currency pair higher. Whereas, the U.S.U.S. Dollar Index that measures the greenback against a bucket of 6-major currencies rose by 0.03% to 92.362 by 12:33 AM ET (5:33 AM GMT). Moving on, the U.S.U.S. dollar may put further bids only if the U.S.U.S. will succeed in releasing more relief measures.
The crude oil prices have been reporting modest gains at the crude oil front since the Asian session started mainly boosted after the American Petroleum Institute (API) announced a larger-than-expected draw in crude oil inventory. The better-than-expected U.S.U.S. manufacturing activity data and the Upbeat China and Japan data also supported the oil prices, considering the global economic recovery. Thus, the rise in oil prices underpinned demand for the commodity-linked currency, the loonie, and became the major factor that capped the pair's further gains.
Looking forward, the market traders keeping their eyes on the U.S.U.S. Energy Information Administration's figures on crude oil supply, which is scheduled to release later in the day. The Labor Productivity q/q data from Canada will also be key to watch across the pond. In the meantime, the updates surrounding the fresh Sino-US tussle and the coronavirus (COVID-19) updates could not lose their importance.
Daily Support and Resistance
S1 1.2862, S2 1.2956, S3 1.301
Pivot Point 1.3049
R1 1.3103, R2 1.3142, R3 1.3235
The USD/CAD has violated the downward channel at 1.3053 level, and now this is likely to drive the buying trend in the pair. On the higher side, the USD/CAD may soar towards the next target level of 1.3139; however, the 50 periods EMA may extend resistance at 1.3120 level on the way. The RSI is also crossing over 50, which suggests odds of further buying trend in the pair. Let's consider buying USD/CAD over 1.3055 level to capture quick 40 pips. Good luck!