USD/CAD: 2 reasons why Canadian dollar is surging today
- The USD/CAD pair declined as investors reacted to relatively strong Canadian PMI data.
- The PMI data from Ivey School declined to 54.3, which is a sign that businesses are doing well.
- The Canadian dollar has also gained because of the overall weaker US dollar.
The USD/CAD price declined in overnight trading as investors reacted to the relatively strong economic data from Canada and the overall weaker dollar. The pair is trading at 1.3260, which is slightly below yesterday’s high of 1.3340.
Canada business activity improves
The Canadian economy has been under pressure recently. The number of Covid-19 cases has continued to jump and the price of crude oil has been relatively lower. According to health officials, the country confirmed more than 2,300 cases yesterday, which is close to the highest daily increase. In total, the country has confirmed more than 173,000 cases and almost 10,000 deaths.
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The price of crude oil has also been under pressure recently. The price of Brent has dropped from the August high of $45 to the current $42. On the other hand, the West Texas Intermediate (WTI) is trading at $39. This is important because of the fact that Canada is one of the biggest oil producers in the world.
Still, data from Ivey Business School showed that business activity remained upbeat in September. The PMI came in at 54.3, down from the previous month’s 67.8. While this was a decline, the figure remains above 50, which is a sign that the sector is on a recovery path.
According to Ivey, the employment index declined from 56.1 in August to 49.6 in September. In the same period, the inventories index declined from 50.9 to 50.5 while the supplier delivery index fell from 51.3 to 50.2. The Ivey prices index fell from 57.6 to 56.9.
The relatively strong Canadian PMI data came a day after the statistics office released weak trade numbers. The country’s exports fell from C$45.4 billion in July to $44.93 billion in August. Imports, on the other hand, fell from C$47.93 billion to C$47.38 billion. As a result, the total trade deficit narrowed to C$2.45 billion.
Meanwhile, the USD/CAD price fell because of the overall weaker US dollar as investors remained optimistic about stimulus in the United States. In a statement yesterday, Donald Trump asked congress to pass a new stimulus that provides aid to Americans and companies. That was a reversal from his statement on Tuesday about postponing talks to after the election.
USD/CAD technical outlook
The four-hour chart shows that the USD/CAD price declined to a low of 1.3243 on October 6. It then recovered and reached a high of 1.3340 yesterday and is now at 1.3258. The price remains below the 25-day and 15-day exponential moving averages. It is also below the ascending red trendline that connects the lowest levels in September. As such, I expect that the pair will continue falling as bears attempt to move below the double bottom level at 1.3243.