- The euro remained weak on concerns about a financial crisis in France.
- The Canadian dollar rose on Friday after data showed factory sales rose 1.1%.
- Expectations for a rate cut from the Bank of Canada have dwindled since the Fed held a somewhat hawkish policy meeting.
The USD/CAD outlook showed bullish momentum on Monday as the dollar strengthened amid political uncertainty in the Eurozone. Meanwhile, the Canadian dollar retreated from Friday's highs as data showed the Canadian economy was strengthening.
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The dollar started the week on a strong note as the euro continued to weaken on concerns over France's fiscal crisis. Recently announced early elections could mean a change in France's leadership and a worsening fiscal position.
As a result, the French market sold off last week, bringing back memories of the UK's fiscal crisis. Meanwhile, the euro fell to its lowest in over a month last week, especially as the ECB showed no signs of supporting the French market. The euro's decline boosted the dollar, which makes up 57% of the dollar index.
Meanwhile, the Canadian dollar gave up some of last week's gains due to the greenback's strength. The Canadian dollar rose on Friday after data showed factory sales rose 1.1% in April. At the same time, wholesale trade rose 2.4% in April.
Moreover, USD/CAD traders are already pricing in a rate cut from the Bank of Canada this year, meaning any talk of a rate cut will have little impact on the pair. Last week, the Bank of Canada became the first major central bank to cut interest rates. However, expectations for a rate cut have dwindled since the Fed's somewhat hawkish policy meeting.
USD/CAD Major Events Today
- Empire State Manufacturing Index
USD/CAD Technical Outlook: Bulls challenge the 30-day MA
On the technical front, the USD/CAD price has risen above the 30-SMA and is on the verge of retesting the resistance level at 1.3780. At the same time, the RSI has slightly risen above 50 and entered the bullish territory. As a result, the price might break out of the SMA. If that happens, the bulls might challenge the resistance level at 1.3780 and aim for a new high.
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However, the bears are also showing strength with a bearish engulfing candle. If this strength continues, the price might not be able to sustain above the SMA. This could mean a drop to the bullish trend line or the 1.3700 support level.
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