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USD managed to gain impulsive momentum over CAD recently which made the price pullback with a target towards 1.3400 after the recent impulsive bearish momentum in the pair.
The BOC stated at the last monetary policy meeting that an economic rebound is just around the corner. In other words, the slowdown in the domestic economy is coming to an end soon. Canada's employment declined to 28K in May following a surge of 107K in April. The oil sector and the housing market have started to stabilize which indicates a strong domestic market. Housing starts decreased from 233K to 202K but building permits improved significantly to 14.7% from 2.8%. Amid the ongoing bearish pressure, crude oil prices slumped almost 3.0% in a single trading day. Oil settled down at the level below the $52.00/barrel. CAD might find support if oil prices rebound from that area in the short term. The private sector has revealed a revival in 2019.
On the other hand, amid the trade war between the US and China there are nearly three weeks to go before US and China's state leaders proceed with the proposed talks. Investors have low expectations for progress in the trade talks. So, the trade deal will hardly be finalized soon. In this context, health of the world economy is at stake. US President Donald Trump recently defended the use of tariffs as part of his trade strategy while China vowed to make a tough response if the United States insists on escalating trade tensions. Since last month, there is a growing likelihood that the Federal Reserve interest rate will eventually decide on a rate cut in the near future. The lingering trade conflict between the US and China is one of catalysts for uncertainty. Fed Chair Jerome Powell said last week the central bank would act as appropriate to address risks from the US-China trade war, leaving the door open for a possible rate cut.
Today US import prices report is going to be published with the index which could have dropped to -0.3% from the previous value of 0.2%. The number of unemployment claims is expected to decrease to 215k from the previous figure of 218k. To sum it up, despite dismal nonfarm payrolls released on Friday, USD has been broadly unaffected. So, traders are in no hurry to sell USD because they are in the cautious mood. The pair is set to trade with higher volatility. CAD still has the upper hand over USD.
Now let us look at the technical view. The price is currently trading below 1.3350 area after an impulsive daily close near to it yesterday. Though the market remains quite volatile and corrective, CAD still has a greater probability to gain momentum over USD as the price remains below 1.3500 area while the dynamic level of 20 EMA acts as resistance.
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