This range represents a fall of ~12.5% on the pair, and a lot of the move can be contributed to the support provided by the Bank of Canada as well as Canadian economic data like inflation. What’s more, from a seasonal perspective, Commodity currencies are now heading into a month where they tend to outperform the US Dollar so Canadian dollar strength could continue.
In addition to the seasonal support for further CAD strength, Janet Yellen’s dovish speech on Tuesday at the Economic Club of New York has placed a high hurdle in front of the US dollar. Now, it appears that US economic news releases have more potential to harm the US dollar than help it as we saw on April 1 with a relatively positive nonfarm payroll and manufacturing data and print. Given that much of the Canadian Dollar’s move comes from what isn’t happening to the US Dollar, we could continue to see Canadian Dollars support.
Regarding Intermarket influences on the Canadian Dollar, traders will continue to look at the price of WTI Crude Oil. Oil has fallen by 10% since testing the 200-day moving average on March 22. While the US dollar may continue to favor a higher price for oil, if we can see a resumption an uptrend trend like was the case from mid-February to late March, the Canadian dollar yet another force that will provide a bid for the Loonie.
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Next week, Canada will announce employment data which has been volatile this year. In February, the rate was 7.3% with a drop in employment of 2.3 thousand jobs. Another critical component will be housing starts, which will help traders to see if the economy is weathering the year-over-year drop in oil price. Stability or improvement in these measures could further support the price of the Canadian Dollar, and the critical 1.2836 level could soon break.
The chart above can help you see how sentiment helps you see turns in the market as well as acceleration points. When looking at sentiment, crowd sentiment has moved positive providing favor for more downside, and this trend appears to be accelerating. We use our Speculative Sentiment Index as a contrarian indicator to price action, and the fact that the majority of traders are net-long at a bull: bear of 1.61 as 63% of traders are long means that a bearish USD/CAD signal is currently at play.