The Bank of Canada’s hawkish stance in comparison to the majority of its peers has driven the risk-sensitive Canadian Dollar higher against the haven-associated Japanese Yen and Swiss France for the majority of 2021
Attention will be intently focused on upcoming jobs figures out of Canada, given the robust non-farm payrolls figures out of the US earlier this month. Disappointing figures would reinforce the divergence in economic fundamentals between the two countries and probably drive the USD/CAD exchange rate higher.
From a technical perspective, the outlook for USD/CAD remains relatively bearish, as prices continue to track below all six moving averages. However, the formation of a bullish Falling Wedge formation suggests that a topside reversal could be on the cards, if buyers can successfully drive the exchange rate back above the trend-defining 55-EMA (1.2628). This could trigger an impulsive upside move to challenge the March high (1.2737), with a convincing break above bringing the 144-EMA (1.2965) into the crosshairs. Alternatively, if the 1.2600 handle remains intact, sellers may regain control of the exchange rate and drive prices back towards the yearly low (1.2365).