USD/CAD: massive sell-off
The pair slumped to levels unseen since January. What’s next?
Fundamentals
The most obvious reason why USD/CAD has dropped so much is the weak US dollar. The uncertainty over the next US fiscal stimulus package, decreasing US Treasury bond yields and the current risk-on sentiment weighed on the greenback. What’s interesting is that even the recent resignation of Canadian Finance Minister Bill Morneau didn’t have any impact on the loonie.
Pay closer attention on two significant economic releases on Wednesday: the OPEC meeting and FOMC meeting minutes. They may add some volatility to the Canadian dollar. OPEC members will discuss further cuts of the oil supply. In fact, Canada is one of the largest oil producers in the world. Therefore, any changes in the oil market will influence the loonie. Moreover, the Fed will unveil the detailed report of its last meeting the same day on the evening. Analysts anticipate that the Fed’s dovish tone may push the USD down even more.
Technical tips
On the daily USD/CAD chart we can notice that the pair has entered the descending channel. If it slumps below the support level at 1.311, which it has touched several times, it may drop deeper to the low levels of January at 1.3035. On the flip side, if it jumps above the high of August 6 at 1.3320, it may surge to the high of the end of July at 1.3415.
Follow OPEC meeting and FOMC meeting minutes on Wednesday!
