The Canadian dollar is deep in red territory in the Monday session. Currently, USD/CAD is trading at 1.2767, up 0.63% on the day. On the fundamental front, it’s a quiet start to the week, with no economic data out of the US or Canada. The Bank of Canada released its Business Outlook survey, which is released on a quarterly basis.
US dollar rebounds
The US dollar is showing some newfound strength and this has continued on Monday, with the Canadian dollar down sharply. This is largely a result of higher US yields, which has resulted in a US dollar short squeeze and pushed the currency to higher levels. The US dollar index continues to move higher and reached a daily high of 90.71. The dollar index is putting pressure on a major resistance line at 91.00; a daily close above that line would likely extend the dollar short squeeze. With US yields continuing to move higher, investors have been in a forgiving mood despite a dreadful US nonfarm payrolls report on Friday. The US economy shed 140 thousand jobs in December, its worst performance since April, when Covid-19 shut down the economy and nonfarm employment plunged by an unimaginable 20 million jobs. If US yields continue to move higher, it could be a winning week for the US dollar.
BoC survey sees recovery
The Bank of Canada Business Outlook Survey reported that the business sector expects that domestic and foreign demand will strengthen, fuelling the economy’s recovery. Business sentiment is showing slight improvement but at the same time, firms expect the recovery to be uneven. The BoC survey found that businesses expect inflation to remain somewhat below two per cent, over the next two years.
- USD/CAD has broken above resistance at 1.2738 and is testing resistance at 1.2783. The next line is 1.2822
- The first line of support is at 1.2654. Below, there is support at 1.2615
- The pair is testing the 20-day MA line. If the pair pushes above the pair, it is a sign of an upward trend
For a look at all of today’s economic events, check out our economic calendar. www.marketpulse.com/economic-events/
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