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Canadian Dollar Price Outlook: USD/CAD, EUR/CAD Eyed Post-BoC

Canadian Dollar Price Outlook: USD/CAD, EUR/CAD Eyed Post-BoC

Rich Dvorak, Analyst

CANADIAN DOLLAR PRICE OUTLOOK: USD/CAD, EUR/CAD IN FOCUS FOLLOWING BOC ANNOUNCEMENT

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The Canadian Dollar was a mixed bag on Wednesday with Loonie strength versus its US Dollar and Yen peers offset by weakness more broadly. CAD price action edged lower against its FX counterparts mid-session in response to the latest Bank of Canada announcement, which disappointed some expectations for a slightly more hawkish tone. Canadian Dollar bulls were largely unfazed by cautious outlook found in the BoC statement, however, seeing that the central bank is still considered likely to signal QE tapering in the near future.

USD/CAD PRICE CHART: DAILY TIME FRAME (12 OCT 2020 TO 10 MAR 2021)

USDCAD Price Chart Canadian Dollar Technical Forecast

USD/CAD popped about 50-pips in immediate reaction to the latest Bank of Canada interest rate decision, though the move was faded as trading progressed. In fact, the Canadian Dollar closed the session near intraday highs against its US Dollar cousin. USD/CAD whipsawed lower as the US Dollar weakened broadly alongside a deeper pullback in Treasury yields. That said, we could see a resumption of USD/CAD selling pressure as Canadian Dollar bulls set their sights back on year-to-date lows.

USD/CAD Bearish
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of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 11% -27% -7%
Weekly 12% -15% 0%
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This follows the latest close below its 20-day simple moving average. Not to mention, waning upward momentum highlighted by the MACD indicator and relative strength index both underscore constructive technical developments for USD/CAD bears. The 50-day and 100-day simple moving averages could come into focus as potential areas of resistance to fade short-winded bouts of strength.

EUR/CAD PRICE CHART: WEEKLY TIME FRAME (31 OCT 2016 TO 10 MAR 2021)

EURCAD Price Chart Canadian Dollar Technical Forecast

EUR/CAD price action edged slightly higher on the day as bulls attempt to defend the 1.5000-handle. Looking at a weekly EUR/CAD chart we can see the currency pair does look a touch oversold. This is highlighted by the relative strength index as well, which hovers around 35. As such, there could be potential for a counter-trend rebound higher in the short-term.

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If EUR/CAD does catch a bid off current levels, Canadian Dollar bulls might consider reloading near the 8-week simple moving average. This could hinge on the premise that the Bank of Canada is still likely to provide guidance on scaling back its pace of QE, and that crude oil prices may continue climbing. The resumption of EUR/CAD selling pressure could prime the Canadian Dollar for another test of the broader bullish trend extended through the early 2017 and 2020 lows.

-- Written by Rich Dvorak, Analyst for DailyFX.com

Connect with @RichDvorakFX on Twitter for real-time market insight

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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