• Data from Canada revealed an unexpected trade surplus of C$638 million in June.
• Canada’s services PMI edged higher from 47.1 to 47.3 in July.
• Oil prices rose on Wednesday as focus shifted to the escalating Middle East tensions.

The USD/CAD price analysis paints a bearish picture as the Canadian dollar recovers after upbeat economic data. At the same time, the loonie got a boost from rising oil prices and a pause in the US stock market sell-off.

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Data on Tuesday revealed an unexpected trade surplus of C$638 million in June as oil shipments in Canada increased. Meanwhile, economists had expected a deficit of C$ 1.84 billion.

Separate data on Tuesday showed that Canada’s services PMI increased from 47.1 to 47.3 in July. However, since the figure remains below 50, business activity is low. Moreover, the sector is in contraction rather than expansion.

Notably, Canada’s economy has slowed significantly due to high borrowing costs, and inflation has cooled. For this reason, the Bank of Canada has cut rates twice this year. Furthermore, markets are betting on another rate cut in September.

Meanwhile, oil prices rose on Wednesday as focus shifted to the escalating Middle East tensions. Notably, Hamas has chosen a new leader to succeed the one recently assassinated in Iran. A rally in oil is bullish for the Canadian dollar, a commodity currency.

Further strength for the loonie came from increased risk sentiment as Wall Street recovered from its sell-off. Meanwhile, the dollar was steady despite increased Fed rate cut expectations.

USD/CAD key events today

Investors are not expecting any critical economic reports from the US or Canada. Therefore, the price might consolidate.

USD/CAD technical price analysis: Price drops as market sentiment shifts

On the technical side, the USD/CAD price is falling after a recent shift in sentiment. Bears took control when the previous bullish trend failed to go beyond the 1.3900 key resistance level. The reversal started with a bearish divergence in the RSI, which showed fading bullish momentum. At the same time, the price made a solid doji candlestick, showing indecision at a critical resistance level.

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Soon after, bears took control with a break below the 30-SMA and the 1.3802 support. The price is now on the verge of breaking below the 0.5 Fib level, allowing bears to revisit the 1.3701 support.

https://www.forexcrunch.com/blog/2024/08/07/usd-cad-price-analysis-upbeat-data-lifts-canadian-dollar/