Canadian Dollar experiences pullback post China’s economic data

As the mood of the market turns more bearish on Tuesday, the Canadian dollar is weakening and losing the gains it made against the US dollar last week. Risk appetite is being negatively impacted by a significant miss for Chinese trade data as well as hawkish remarks made by Federal Reserve representatives.

The September figures for Canada’s trade balance showed a slight improvement over the previous figures, with both imports and exports posting gains. Canadian imports increased slightly to $64.99 billion from August’s $64.33 billion, which was also revised higher from $63.84 billion, while exports increased marginally to $67.03 billion from $65.28 billion (revised upward from $64.56 billion).

After being revised higher from $720 million in August to $950 million in September, Canada’s total international merchandise trade increased to CAD $2.04 billion.

With global markets looking for safe haven as last week’s risk-on attitude fades, the CAD is losing ground. Early on Tuesday, the markets were negatively impacted by a miss for China trade data, which came after the country’s trade balance figures unexpectedly dropped.

At last week’s rally, hawkish Fed appearances began to fade as Fed officials reaffirmed that the US central bank is not committed to stopping rate hikes in advance.

The Canadian dollar is receiving less support as a result of the decline in crude oil prices due to risk-off flows. Russia reiterated its production cut, which might last until the first quarter of the following year, with minimal impact on the crude oil market.

To bolster its national reserves, the US is importing more crude oil, and US and Chinese refineries’ throughput is falling short of demand projections, leaving more barrels in the pipeline than anticipated.

With the US dollar holding back nearly half of its gains against the Canadian dollar, the USD/CAD pair has recovered nicely from the 50-day Simple Moving Average (SMA) around 1.3630 and is now heading back towards the 1.3800 handle.

In the event of a bullish continuation, the USD/CAD will start to break away to the topside from a bullish trendline rising from July’s bottom bids near 1.3100, marking an acceleration in the pace of higher lows. For bullish Greenback bidders, the final swing high into the 1.3900 handle represents the near-term technical ceiling.

After 2023’s low bids of 1.3092, the US Dollar has gained over 5% versus the Loonie and gained over 1.5% for the year.