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Buying the Dip Opportunity?

Market Analysis


USDCAD took a tumble at the open, bottoming at 1.2861, though had been on the decline since earlier in the London morning session. The pairing peaked at an eight-month high of 1.3001 on Monday. The move lower has been attributed to growing opposition to Trump tariffs, where retaliatory overtures have been heard from the EU and Canada this morning, lowering expectations that the tariffs will actually be imposed.

Meanwhile, data out of canada and US increased volatility  of USDCAD, with  Canada’s Toronto home sales tumbled 34.9% y/y in February, with broadbased weakness across segments evident, while U.S. factory orders declined 1.4% in January, unwinding much of the 1.8% jump in December (revised from 1.7%). This is the first decline in factory orders since July, and after four of the last six months posted gains of better than 1%. Importantly, Canada’s Ivey PMI data also released and presented an improvement to 59.6 in February from 55.2 in January contrasts with the modest declines seen in the CFIB’s Business Barometer and the RBC manufacturing PMI in February. These indicators, while not the most reliable guides to underlying activity in Canada’s economy, do benefit from being the most timely. Hence, the resilience in all three measures during February is suggestive of resilience in Canada’s economy during Q1, despite gathering headwinds (trade, housing.) U.S. growth remains, of course, a strong tailwind for Canada’s economy.

Technically-wise, loonie’s spike lower today, could be consider as a buying the dip opportunity, since in the bigger picture, the pair remains on a strong bullish view. In the 1-hour chart, pair extended its lower Bollinger bands pattern, however it is currently getting back up, into the Bollinger Bands territory. The RSI drifted down to 29, but bounced back above 30, while intra-day MACD remains in the above neutral level. importantly, in the 4-hour chart, it is still moving within the upper Bollinger Bands pattern, above 20, 50 and 200 -period EMA. Momentum indicators in the particular timeframe, move above neutral, with MACD presenting a strong momentum to the upside.

Therefore, the pair remain in a bullish trend, with the possibility of retesting 1.3000 level again. Oppositely, only a break below the immediate support area at 1.2750 – 1.2800, could suggests that bears taking some control on the pair.

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Andria Pichidi

Market Analyst


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