Canadian Dollar looking for upside as US Dollar recedes

• Loonie is tracking crude barrel prices, USD closely.
• Canada GDP is expected to see sluggish growth.
• Canadian inflation remains sticky, keeping the BoC on its toes.

The Canadian Dollar (CAD) is seeing minor gains against the US Dollar (USD) on Thursday as the Greenback eases off from recent gains. With Oil barrel prices also taking a quick breather, and crude Canada’s main export, the CAD is seeing limited momentum. The USD/CAD is largely flat for Thursday, down a scant 0.2% at its lowest point as the pair threatens consolidation near 1.3500.

Canada's economic data remains thin on the calendar, with Friday’s Gross Domestic Product (GDP) figures closing out an otherwise data-empty trading week. Canadian GDP for the month of July is forecast to print a meager 0.1% versus the previous month’s -0.2%. Oil prices and the broad-market US Dollar Index (DXY) are set to remain the CAD’s main drivers on the charts.

Daily Digest Market Movers: Canadian Dollar twisting into the middle

• The CAD gained nearly 2.3% against the USD in September, bolstered by scorching Oil prices.
• The USD/CAD is currently down 1.5%, with surging DXY winning the head-to-head battle with crude barrel prices in the near term.
• Canadian GDP is seen struggling to firm up growth as stubborn inflation remains.
• Bank of Canada (BoC) officials have been routinely hitting the wires trying to jawbone inflation lower with threats of higher interest rates.
• The BoC’s Governor Macklem and Deputy Governor Kozicki have made appearances, reiterating calls for rates to remain higher for longer as inflation still remains too high.
• Canada was the world’s second-largest oil exporter in Dollar-adjusted terms, exporting over $120 billion USD of crude in 2022, nearly 9% of the entire global oil export market.
• One of the top oil exporting countries globally, the Loonie sees a majority of its momentum dictated by barrel prices.

Technical Analysis: Canadian Dollar

The Canadian Dollar (CAD) has gained against the US Dollar (USD) from September’s peak in the USD/CAD near 1.3695, and is set to close out the month near where it started at 1.3500, if directional momentum remains elusive heading into the final days of September’s trading.

The USD/CAD is currently pinned to the 34-day Exponential Moving Average (EMA) at the 1.3500 handle, with near-term support from the 200-day Simple Moving Average near 1.3450. A floor is priced in from the last swing low into 1.3380, while 1.3650 remains a significant technical resistance barrier that has rejected price action multiple times this year.