• Canadian Dollar rises versus the Buck on the back of a bullish outlook for Crude Oil. 
• The expectation that the BoC will have to keep interest rates higher for longer compared to the Fed may be a factor supporting CAD. 
• Technically USD/CAD is coming back down to retest a major support confluence in the upper 1.30s where it has previously bounced.

The Canadian Dollar (CAD) edges higher for the fourth consecutive day against the US Dollar (USD) on Thursday, on the back of bullish expectations for Crude Oil, Canada’s primary export. The possibility that the Bank of Canada (BoC) may keep rates higher for longer to combat persistent inflation is supporting CAD as market expectations that the US Federal Reserve (Fed) will cut rates relatively earlier, in H1 of 2024 persist. 

The USD/CAD pair trades in the 1.31s as the US session gets underway.  

Canadian Dollar news and market movers 

• The Canadian Dollar is rising versus the US Dollar (USD/CAD falling), continuing its trend for the fourth consecutive day. 
• A more positive outlook for global Oil prices, Canada’s premier export, may be a factor driving CAD higher. 
• China is importing record amounts of – especially Russian – Crude Oil, according to analysis by the Financial Times, cited by Oilprice.com. 
• Chinese imports of Russian Oil totalled 2.13M barrels per day in H1 2023, helping Russia oust Saudi Arabia from the top spot as the world’s largest Oil exporter. 
• Imports to China surged 45.3% YoY in June alone, to the “second highest monthly figure on record”, according to Oilprice.com, “as refiners continued building up inventories despite weak domestic demand.”    
• China’s accumulation may be a sign Chinese Oil traders are building inventory because they foresee a rally ahead for the commodity. 
• Crude Oil prices may be basing and preparing for a rally, according to analysis by DailyFX.com. 
• WTI Crude Oil has broken and consolidated above a key downtrend line suggesting it could be pausing before another leg higher. 
• The US Federal Reserve is still almost certain to raise interest rates by 0.25% at its July 26 meeting, according to the CME FedWatch Tool. The highest chance of another rate hike after that is in November, when the tool assigns a 29% probability to the event. 
• The Bank of Canada is 20% liable to raise interest rates at its next meeting in September, however, sticky inflation, according to the BoC’s recent forecasts, may keep rates higher for longer going forward. 
• The Fed, on the other hand, is foreseen potentially cutting interest rates in early 2024, and it is possible this expectation of future divergence between the two central banks is another factor helping propel CAD higher (USD/CAD lower). 

Canadian Dollar Technical Analysis: Returning to critical support level

USD/CAD is probably in a long-term uptrend on the weekly chart, which began at the 2021 lows. Since October 2022, the exchange rate has been in a sideways consolidation within that uptrend. Given the old saying that ‘the trend is your friend’, however, the probabilities favor an eventual continuation higher and longs over shorts.

USD/CAD appears to have completed a large measured move price pattern that began forming at the March highs. This pattern resembles a 3-wave ABC correction, in which the first and third waves are of a similar length (labeled waves A and C on the chart below).