USD/CAD declines as CAD strengthens on weaker USD, OPEC’s decision

The Canadian Dollar strengthened as a result of a lack of oil supply and a weak US Dollar, pushing the USD/CAD pair south of the 100-day EMA. After reaching a daily high of 1.3536, the USD/CAD is currently trading at 1.3450. the pair is down by 0.68 and is trading at 1.3423 at the time of writing.

Recessionary fears were sparked in the US by dampened corporate activity. Wall Street presents a positive outlook. Two factory activity indicators in the United States declined, indicating that a deeper economic recession is imminent. S&P Global Manufacturing PMI for March was 49.2, which fell short of expectations for 49.3. Subsequently, the Institute for Supply Management (ISM) released its Manufacturing PMI, which fell to 46.3, below the forecast of 47.5 and below the figures from February.

As a result, the dollar lost some of its earlier gains despite rising oil prices. The US Dollar Index (DXY), which measures the value of the dollar in relation to a basket of six different currencies, declines by 0.38% from 103.05 to 102.20.

Hence, as traders started to factor in a less aggressive US Federal Reserve, the USD/CAD fell from approximately 1.3500 and recorded a daily low of 1.3424. (Fed).

During the weekend, the Organization of Petroleum Exporting Countries and its allies (OPEC+) declared that the reduction of 1 million barrels of oil had helped to boost oil prices. From its close on Friday at $75.68 to $81.00 a barrel, WTI increased by more than $6.00.

OPEC’s move, according to the most recent Fed speakers, led by St. Louis Fed President James Bullard, would make the Fed’s work more challenging. Bullard stressed that his forecast is above the median and reiterated that the Fed needs to hike rates above 5%.

The S&P Global Manufacturing PMI for Canada dropped from 52.4 to 48.6 over the previous month, giving a bleak picture of the country’s economic future. Recent results from the Bank of Canada’s Business Outlook Survey (BOS) revealed that about half of the companies polled anticipate a mild recession in the nation. Nevertheless, 59% of companies anticipate inflation to be higher than 2% until at least 2025.

Technically; the USD/CAD dropped below 1.3519, the 100-day EMA, which exacerbated a break below 1.3500. Although the USD/CAD pair reached a weekly low of 1.3424, the pair has recovered some ground as sentiment continues to deteriorate amid recessionary scenarios.