USD/CAD bounces back from 7-month low as crude oil prices falls

The USD/CAD pair rose by 0.50% as traders reacted to lower crude oil prices and the rising likelihood of a V-shaped recovery in the United States. The pair is also reacting to robust trade numbers from Canada.

Canada reports strong trade data

Canada has made significant strides to reopen its economy as it continues to deal with the coronavirus pandemic. In August, the country’s exports increased by more than $5 billion to $45.43 billion. That was higher than the $38.8 billion that analysts were expecting.

In the same month, the country bought goods worth more than $47.88 billion from international countries. That was higher than the previous month’s increase of $42.49 billion.

As a result, the country’s trade deficit widened to more than $2.45 billion. Analysts were expecting it to narrow to $2.50 billion. For starters, a trade deficit or surplus is calculated by subtracting imports from exports.

According to the bureau, the biggest contributors to exports and imports were motor vehicles and parts. The country imported vehicles and parts worth more than $8.1 billion. Most of these vehicles were imported from the United States and Mexico. Other contributors to imports were electronic and electrical equipment mostly from China and South Korea.

Canada exported vehicles worth more than $8.2 billion, which was 11.7% higher than those it exported before the pandemic. Passenger cars and light trucks increased by 42.4% while engines and parts rose by 30.7%.

The United States remained being Canada’s biggest trading partner. In August, it imported goods worth more than $30.7 billion from the US. Its exports to the US rose to $33.5 billion.

Meanwhile, data from the US showed that exports rose to $168 billion while imports rose to more than $231 billion. This left the country’s trade deficit to widen to more than $63 billion.

The USD/CAD pair is also rising because of low crude oil prices. The price of Brent is down by more than 2.16% while West Texas Intermediate (WTI) has dropped by 2.20%.

USD/CAD technical outlook

The daily chart shows that the USD/CAD pair has been in a strong downward trend. It reached the year-to-date low of 1.3000 on Tuesday. The price is below the 50-day and 100-day exponential moving averages. Also, the pair has formed a descending equidistance channel that is shown in black. Therefore, the USD/CAD trend is still bearish, meaning that the pair is likely to move back lower once it moves to the upper side of the channel.