USD/CAD: the greenback is approaching an important support against the Canadian dollar

The greenback could soon regain control against the Canadian dollar

USD/CAD has been tumbling for several weeks after rallying to an over-year high in May, but the greenback may soon rebound as it nears important support at around 1.2450. USD/CAD has fallen around 4% in recent weeks on support from oil prices to the Canadian dollar, and some profit taking on the greenback following renewed investor optimism.

However, USD/CAD may soon rebound as it nears key support at around 1.2450 and the economic slowdown, the main driver of the rebound since spring 2021, remains in play. The global economic slowdown is still underestimated, as evidenced by the forecasts of major institutions which are regularly revised downwards, which should continue to strengthen exponentially the greenback. Indeed, demand for the dollar is growing exponentially as economic fears mount. Demand for the greenback is typically strongest when the global economic outlook is bleakest.

Nevertheless, the greenback’s outperformance should not be drastic given that the Canadian dollar should continue to benefit from the surge in oil prices and the very rapid tightening of the Bank of Canada’s monetary policy.

4 hour chart of USD/CAD price – key levels

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