- USD / CAD retreats from four-day high and continues to trade near monthly lows.
- The loonie supported by risk sentiment and rising crude oil prices.
The USD / CAD is lower on Tuesday amid a weak US dollar and higher crude oil prices. In European hours, the pair peaked at 1.3239, the highest level since Thursday, then trended lower. It peaked at 1.3175 and is hovering around 1.3200 at the time of writing, down 20 pips for the day.
The loonie managed to turn positive against the US dollar despite the decline in equity markets. Improving relations between the United States and China boosted market sentiment earlier today, but then faded. In fact, for the moment, US stocks are mostly lower. The Dow Jones lost 0.65% and the Nasdaq gained 0.10%.
A key support for the Canadian dollar on Tuesday is the rebound in crude oil prices. West Texas Intermediate is up 1.55%. It hit the highest intraday level since March earlier on Tuesday, before pulling back. Hurricane Laura is heading towards the Gulf Coast.
The US economic data has been mostly ignored by market participants. The numbers showed two surprises: a surge in new home sales in July and a significant drop in consumer sentiment to a six-year low in August.
In a few minutes, the Deputy Governor of the Bank of Canada, Lawrence Schembri, will deliver a speech. His words could trigger certain movements. The BoC launched a public consultation on inflation targeting on Monday; this is done every five years.
USD / CAD continues to trade sideways in the short term, with vital support around 1.3120 / 30 August low (lowest since January). On the upside, 1.3235 / 40 is critical resistance; a break above would likely result in more gains and a test of the 20 day moving average at 1.3278.