July 6, 2021 14:56:20

The loonie has barely benefitted from recent rising commodity as markets look through the current near-term price pressures and oil succumbs to some profit taking this afternoon. Hopes that an OPEC+ deal will materialise in due course may not alter this picture. But punchy survey data overnight has pushed next week’s Bank of Canada meeting into the spotlight with expectations growing that the bank will once again slow its pace of bond buying.

We do have the FOMC minutes and the Canada labour market report to contend with this week, which could hurt CAD ahead of the BoC potentially furthering its credentials as one of the leading bullish central banks and easing the pressure on the loonie.

USD/CAD higher into resistance

After finding a base for several weeks above 1.20, USD/CAD has formed a “cup and handle” technical pattern where the cup is in the shape of a “u” and the handle has a slight downward drift to the right of the cup. The cup is not overly deep and is more “u” shaped than “v” shaped which is a good sign, with this pattern normally acting as a bullish continuation pattern used to spot opportunities to go long. That said, the signal ordinarily extends an uptrend, but this is not really the case with USD/CAD.

In any event, prices have consolidated for a few weeks having surged higher after the June Fed meeting. That move extended beyond the upper Keltner channel and the overbought conditions have now eased as the pair has tracked sideways recently. We are now approaching the post-FOMC highs around 1.2480/86 so this offers first resistance with bulls eyeing the April high at 1.2654 if this can be broken.

The 100-day SMA at 1.2378 has been pierced today and so the close will be important to see if we can hold prices decisively above here. Similarly, bulls are also trying to break through this year’s descending trendline from the January highs (not drawn on the chart below). Solid support below here sits around 1.23.