USD/CAD – Heading For a Correction?

Greenbacks fortune may be about to change

The dollar has been in a long term downtrend against the loonie but that may be about to change.

The greenback came back into favour on Friday after a period of softness which saw it fall to its lowest level against its Canadian counterpart for around three years.

Rising oil prices can often be supportive for the Canadian dollar and likely contributed to its success over the last four months. But with the oil rally running on fumes ahead of the OPEC+ meeting, that may be about to change.

With that in mind, the pair could be headed for a little correction. The 55/89 day SMA band has been something of a ceiling for the pair during the descent and with it approaching the zone now, we should find out pretty soon if that’s going to be the case once more.

A break above here would be a bullish signal and could set the pair up for a run at 1.30, which would be a big test. A break of this and things are suddenly looking up for the pair after a prolonged period of weakness.

Of course, the outcome of the OPEC+ meeting next week could have a big impact on the pair. The group surprised us back in January and could do so again. That said, given current prices and progress towards the recovery in recent months, a repeat performance seems unlikely.

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Former Craig

Former Craig

Former Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.