USD/CAD Outlook Turns Neutral as Price Gains 1.26 After Poor CAD GDP
- USD/CAD saw bearish pressure but found traction in the NY session.
- Canadian GDP reports missed expectations that weighed on the Canadian dollar.
- Crude oil prices fell that provided respite to the USD/CAD.
The USD/CAD outlook is neutral to bearish around 1.2600 as the pair found some traction after missing Canadian GDP data.
As North American trading opened, the USD/CAD pair rose from two-week lows by around 35-40 pips to 1.2600.
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On Tuesday, the pair remained on the defensive for a third straight session as the US dollar continued to exert pressure. Dollar bulls have taken a defensive stance due to uncertainty about the Fed’s austerity plan and fading hopes for an early recovery.
Although stock markets have improved and US Treasury bond yields have rebounded, a strong dollar has not gained much breathing room. The decline in crude oil prices – which are now down more than 1% for the day – has undermined the commodity-pegged Canadian dollar and helped contain the losses of the USD/CAD pair.
Moreover, disappointing GDP reports have added to the pressure on the Canadian dollar. According to Statistics Canada, the economy shrank by 1.1% in the second quarter of 2021, compared to market growth expectations of 2.5% and 5.5%.
The USD/CAD pair lacks bullish confidence despite the intraday rebound. Therefore, it is prudent to wait for some strong follow-up buying before claiming that the USD/CAD pair has exhausted its recent pullback from YTD lows and is poised for major gains.
USD/CAD technical outlook: 200-SMA to provide respite
The USD/CAD pair found some buyers around the 200-period SMA on the 4-hour chart. The pair is now above 1.2600 area under the congestion of 20/50 SMAs on the same chart. The pair has covered 57% average daily range so far. It shows the pair is still lagging strength to gain further. The price is only testing the lower end of a widespread bar of Friday. This can be another selling opportunity if the price bar turns out to be a no-demand bar.
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