USD/CAD consolidates losses below 1.25 after BoC's Leduc's remarks
The USD/CAD pair, which refreshed its highest level since August 31 at 1.2538 in the late Asian session, erased its gains in the NA session and turned negative below the 1.25 handle after the remarks by the Bank of Canada Deputy Governor Sylvain Leduc helped the loonie gather strength. Following the fluctuation in the session, the pair went into a consolidation phase and was last seen trading at 1.2495, losing 0.12% on the day.
Delivering his remarks on the Canadian economy, Leduc said that that the productivity had increased significantly since mid-2016 and recent data showed the rate of entry for new firms appears to have stabilized. Leduc further added that the increase in productive capacity from new firm creation would allow the economy to grow faster without creating inflationary pressures.
- BoC's Leduc: Significant challenges remain with Canadian productivity still "well below" US
Moreover, the commodity-linked loonie received an additional boost from the modest recovery witnessed in crude oil prices after OPEC Secretary-General Mohammad Barkindo said that the compliance with the oil output cut deal between OPEC and non-OPEC countries were extremely high. The barrel of West Texas Intermediate settled at $50.42, only $0.16 below its opening level.
In the meantime, the greenback struggled to extend its gains against its peers on Tuesday with the US Dollar Index coming back to its daily opening level of 93.48 after losing momentum around the 93.80 handle.
Technical outlook
A daily close below the 1.25 handle could open the door for a deeper correction towards 1.2440 (50-DMA), 1.2400 (psychological level) and 1.2330 (20-DMA). On the upside, resistances align at 1.2600 (psychological level), 1.2630 (Aug. 30 high) and 1.2675 (100-DMA).
- USD/CAD neutral/bullish short term – Scotiabank