The unprecedented plunge of oil prices at the beginning of this week triggered the weakening of the Canadian Dollar against the Greenback. But this factor is just one of the many that has hit the Loonie. USD/CAD hit 1.4264 yesterday and rolled back 1.4160 on Wednesday afternoon. The reason why the US Dollar straightened is due to a safe haven stance of the Greenback in times of the pandemic that provides significant advantage to the American currency. It becomes more and more advantageous as the recovery of the United States economy is considered as a major driver to restart the global economy. The global stimulus launched by major central banks is leading towards additional money supply that is partially accumulated in the US Dollar denominated instruments through special Federal Reserve (Fed) swap lines with world's major central banks and even some emerging markets' central banks like South Korea, Mexico, Singapore and Brazil.
Some Canadian macroeconomic indicators are also weakening. Retail sales in Canada were 0.3% up month-on-month this February while in January sales rose by 0.6% month-on-month. The CPI data for March will be one of the major indicators to be released. It is expected to drop by 1.2% year-on-year against the rise by 2.2% in February 2020.
So, there are many fundamental factors for the Canadian Dollar to continue its depreciation against the US Dollar.
Technical analysis supports this conclusion. USD/CAD broke through local highs of 1.4180 and may establish a target of 1.4300.1.3450 as a resistance. The support for this instrument is at 1.4100-1.4120.
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