USD/CAD Tumbles Below 1.4000 as US Dollar Weakens
The USD/CAD exchange rate dropped below 1.4000 on Friday, trading near 1.3877 and marking its third consecutive weekly decline since early July.
The Canadian Dollar has been bolstered by a weaker US dollar, stronger domestic data, and elevated oil prices.
TD Securities believes that the Bank of Canada's upcoming policy decision will focus on core inflation rather than the impact of higher oil prices, which are seen as a temporary shock.
The USD/CAD pair has been trading below its 50-day and 100-day moving averages since reversing from above 1.4200 in late June, with technical indicators suggesting oversold conditions.
Analysts suggest buying short-term bull call spreads to target a brief relief rally back towards the 100-day SMA at 1.3920 or utilizing long straddles/strangles to capitalize on expected price swings around Canada's Consumer Price Index release and the Bank of Canada's policy decision.