Loonie Set to Post Small Gain as Oil Prices Boost CAD
The Canadian dollar is poised to post a small gain for the week, despite some losses against the US dollar on Friday. The USD/CAD pair rebounded from two-week lows at 1.3765 but still trades above this level.
Oil prices have been a significant factor in the Loonie's strength, with Brent crude surging about 6.5% over the week to reach one-and-a-half-month highs above $96.00 on Thursday. Although it has pulled back slightly to around $94.00, oil's volatility is expected to continue supporting the Canadian dollar.
Markets are also preparing for labour-market releases from Canada and the US next week. Bloomberg consensus forecast suggests Canada will add 15,000 jobs in August, while US nonfarm payrolls are expected to rise by 56,000 after a decline of 23,000 in July. Next week's Consumer Price Index data is also set to have an impact on interest rates.
Technical analysis suggests that USD/CAD may break below the recent low of 1.3765 and accelerate towards the support zone around 1.3650 if it falls further. Derivative traders are advised to consider shorting USD/CAD or buying CAD call options based on this bearish setup.