USD managed to gain impulsive momentum over CAD recently which lead the price to pullback with an aim towards 1.3400 area after the recent impulsive bearish momentum was observed in the pair.
The BOC has expected an economic rebound at their last monetary policy meeting which indicates that the slowdown of the economy of CANADA come to an end. The employment rate has shown 28K as it follows a surge of 107K in April. The Oil Sector and Housing market have started to stabilize which indicates a strong domestic market. Housing Start has been decreased from 233K to 202K but the Building Permit has been improved significantly at 14.7% from 2.8%. The ongoing bearish pressure in Crude Oil prices, now down almost 3.0% for the day and slipping below the $52.00/barrel area. Where the CAD might get support if the Oil price rebounds from any near-term area. The private sector posted a rebound but it is far from being worrying as it follows a great performance in 2019. Moreover, the hourly working is up 2.6% annualized in the quarter after two months of data which is the fastest pace in the last quarter.
On the other hand, US-China trade war having under three weeks to go before proposed talks between the Chinese and U.S. leaders, expectations for progress toward ending the trade war are low and expected that there has been little preparation for a meeting even as the health of the world economy is at stake. U.S. President Donald Trump recently defended the use of tariffs as part of his trade strategy while China vowed a tough response if the United States insists on escalating trade tensions amid ongoing negotiations.
The chances of a Federal Reserve interest rate cut this year have dramatically increased in the past month which is currently observed as an impact of US-China trade war situation. Fed Chair Jerome Powell said last week the central bank would act as appropriate to address risks from the U.S.-China trade war, leaving the door open for a possible rate cut. Today US Import prices report is going to be published which is expected to decrease to -0.3% from the previous value of 0.2% and Unemployment Claims is expected to have positive outcome with decrease to 215k from the previous figure of 218k.
As of the current scenario, despite having worse NFP reports published recently, certain gains on the USD did manage to increase indecision and fear in the trader's sentiment whereas due to mixed reaction in the process, further correction and volatility is expected in this pair whereas CAD still has the upper hand over USD.
Now let us look at the technical view. The price is currently residing below 1.3350 area after an impulsive daily close near to it yesterday. Though the market remains quite volatile and corrective, CAD still has greater probability to gain momentum over USD as the price remains below 1.3500 area while dynamic level of 20 EMA acts as resistance in the process.
