Canadian Dollar claws back ground after snapping nine-day drop

• The Canadian Dollar has found a brief recovery after steady multi-week declines.
• Canada remains light on the economic calendar until next week's BoC rate call.
• The BoC is widely expected to trim interest rates by a further 50 bps, decaying the CAD.

The Canadian Dollar (CAD) pared near-term losses on Wednesday, but not nearly enough to spark a fresh bull run. Markets are likely taking a breather after pummeling the CAD for nearly three straight weeks. The Loonie has shed over 3% against the Greenback since hitting a recent peak against the US Dollar in the bottom half of September.

Daily digest market movers

• The Canadian Dollar recovered some lost ground against the US Dollar, but still remains at the bottom of a long slide.
• The Bank of Canada (BoC) is widely expected to trim interest rates by 50 bps next week, leaving the CAD with little support heading into the rate call window.
• Canadian Consumer Price Index (CPI) inflation figures did little to bolster Loonie investor confidence this week, with a sharp drawdown in headline inflation but an uptick in core BoC-measured inflation.
• Canadian Housing Starts rose in September on a seasonally-adjusted basis to 223.8K from the previous 217.4K, but missed the forecast 237.5K.
• Canadian Manufacturing Sales in August beat expectations, but still contracted by 1.3% compared to the previous 1.4% upswing. Markets expected a print of -1.5% or worse.

Canadian Dollar price forecast

The USD/CAD daily chart shows the pair is losing some steam after a strong rally that propelled it above the key resistance of 1.3750. The pair briefly touched the 1.3800 mark, but recent price action indicates a minor pullback, suggesting that the bulls might be taking a pause. However, the price remains well above the 50-day EMA at 1.3624 and the 200-day EMA at 1.3610, signaling that the overall bullish trend remains intact for now. A close below these moving averages could signal a deeper retracement, but as long as USD/CAD holds above these levels, the bullish momentum is likely to continue.

The MACD indicator remains in positive territory, with the MACD line still above the signal line, but the histogram is showing signs of flattening out. This could suggest that the bullish momentum is waning, and traders should be cautious of a potential consolidation or minor pullback in the near term. A clear break above 1.3800 would be needed to confirm further upside, while a drop below the 1.3650 level could invite fresh selling pressure. Traders will be watching closely for any fundamental catalysts that could push the pair decisively in either direction.

USD/CAD daily chart