USDCAD Turns Lower Ahead of US/CAD Data Flow

USDCAD Heavily SoldUSDCAD is trading firmly lower today as the weakness in USD finds an easy match up with the strong Canadian Dollar. CAD has been one of the best performing currencies recently due to the upward support derived from higher oil prices. With supply concerns and recent actions from OPEC+ helping push oil prices higher, CAD has been well supported of late due to the export-income benefits of higher oil prices. Alongside this, we have also heard a more hawkish message from the BOC compared with other central banks recently. As with the Fed, the BOC held rates unchanged this month while signalling that further hikes would likely be necessary. This has fuelled a wave of inflows given the dovish shift we’ve seen from the ECB and BOE recently.USD Data ImpactLooking at USD, some disappointment with yesterday’s GDP data alongside some dovish Fed commentary, is weighing on sentiment currently. On the back of a solid rally over recent weeks and months, USD now looks vulnerable to a correction lower if today’s data doesn’t surprise firmly to the upside. Given the strength in CAD, if we see today’s data also undershoot forecasts this could see USCDAD turn firmly lower into next week. We also have Canadian FDP due later today which, if seen above forecast, should further amplify the selling in the pair. Technical ViewsUSDCADThe sell off from the 1.3683 level has seen the market breaking down below the 1.3501 level. With momentum studies weakening, while below this level, focus is on a further push lower with 1.3280 the next downside objective for bears. Only a break back above the 1.3501 level near-term will negate this view.