USDCAD Drops to 5-Mth Lows

As oil continues to climb, the Canadian dollar seems supported, despite the recent broad US dollar strength. Therefore, further decline appears likely. 

Earlier today, the US ADP employment change for March printed 455,000, slightly better than 450,000 expected, albeit a bit lower than upwardly revised 486,000 in February. At the same time, the US GDP for the fourth quarter was revised marginally lower from 7.0% to 6.9% annualized. 

As long as the price remains below 1.2450, the short and medium-term outlook look bearish. The next target could be at 1.2385.

Alternatively, if the price closes above 1.2450 today, it might have been a bearish trap/false breakdown, likely sending the USDCAD pair above 1.25 in the following session.

"We retain our constructive view on the CAD and see scope for the USD/CAD to keep grinding lower, supported by higher terms of trade under our baseline outlook for resilient growth, strong exports and elevated oil prices.” analysts at Barclays said on Wednesday.

The Bank of Canada can turn incrementally more hawkish at the April 13 meeting given concerns around high inflation and the risk that longer-run inflation expectations could drift upwards, likely supporting the CAD further.