USD/CAD forms bearish patterns ahead of US NFP data
- The USD/CAD dropped below key support after the strong Canada trade numbers.
- The Canadian dollar also gained after the OPEC+ virtual meeting.
- The path of the least resistance for the pair is to the downside.
The USD/CAD price tumbled to the lowest level since August 31st after the OPEC+ virtual meeting and the relatively strong Canadian trade numbers. The pair declined to 1.2555, which was about 3% below the highest level this year.
Canada trade numbers and OPEC+
Canada is a leading oil producer and exporter. Therefore, the country’s economy tends to be affected by the overall trends in oil prices. As such, the Canadian dollar jumped after OPEC+ members ignored Joe Biden’s plea to boost production.
Are you looking for fast-news, hot-tips and market analysis? Sign-up for the Invezz newsletter, today.
Instead, they decided to gradually increase production even as they predicted a sharp increase in demand in the coming year. Subsequently, the announcement helped crude oil prices bounce back. Brent, the international benchmark, increased by more than 2.3% to $73.27 while West Texas Intermediate (WTI) rose by 2.50% to $70.30.
The USD/CAD price also declined after the relatively strong Canadian trade numbers. According to the statistics office, the total country’s exports increased from c$53.41 billion in June to c$53.75 billion in July. The top exports were energy and automobiles and parts.
In the same period, Canada’s imports increased from c$50.85 billion to more than c$52.97 billion. As a result, the overall trade surplus narrowed down to c$0.78 billion. Meanwhile, in the US, the country’s exports jumped to more than $212 billion while imports narrowed down to $282 billion.
The next key catalyst for the USD/CAD price will be the American nonfarm payroll numbers scheduled for Friday. Economists expect the data to show that the country’s NFP increased by about 750k in August as the recovery continued.
On Wednesday, data published by ADP revealed that the private sector added more than 374k jobs. The pair will also react to the latest ISM non-manufacturing PMI number from the US.
USD/CAD technical forecast
The four-hour chart shows that the USDCAD pair broke out lower on Thursday. This performance was helped by the strong Canadian trade numbers and the relatively high crude oil prices. The pair managed to move below the key support level at 1.2567. It has also formed a head and shoulders pattern and moved below the 25-day and 15-day moving averages.
The pair has also moved below the 38.2% Fibonacci retracement level. Therefore, the path of the least resistance for the USD/CAD price will be to the downside.