USD/CAD Climbs Again Above 50-Day SMA Forward of Fed Fee Resolution

USD/CAD Climbs Again Above 50-Day SMA Forward of Fed Fee Resolution

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Canadian Greenback Speaking Factors

USD/CAD trades again above the 50-Day SMA (1.2854) because it bounces again from a contemporary month-to-month low (1.2816), and the Federal Reserve rate of interest resolution might hold the alternate fee above the shifting common because the central financial institution is predicted to ship one other 75bp fee hike.

USD/CAD Climbs Again Above 50-Day SMA Forward of Fed Fee Resolution

USD/CAD makes an attempt to retrace the decline from the beginning of the week regardless of the larger-than-expected decline within the Conference Board’s Consumer Confidence survey, and the Fed’s mountain climbing cycle might hold the alternate fee afloat because the US central financial institution adjusts financial coverage quicker than its Canadian counterpart.

Because of this, the Federal Open Market Committee (FOMC) fee resolution might generate a bullish response in USD/CAD because the central financial institution prepares US households and companies for a restrictive coverage, and the alternate fee might proceed to commerce to contemporary yearly highs over the approaching months if the committee retains its present strategy in combating inflation.

Image of Atlanta Fed GDPNow model

Supply: Atlanta Fed

Nevertheless, the rising menace of a recession might drive the FOMC to ship smaller fee hikes because the Atlanta Fed GDPNow mannequin states that the “estimate for actual GDP progress (seasonally adjusted annual fee) within the second quarter of 2022 is -1.6 % on July 19, down from -1.5 % on July 15,” and a shift within the Fed’s ahead steering might produce headwinds for the US Dollar if Chairman Jerome Powell and Co. look to winddown the mountain climbing cycle over the approaching months.

In flip, USD/CAD might mirror the value motion from Could if it struggles to carry above the 50-Day SMA (1.2854), and an extra decline within the alternate fee might gas the shift in retail sentiment just like the conduct seen earlier this 12 months.

Image of IG Client Sentiment for USD/CAD rate

The IG Client Sentiment report exhibits 61.34% of merchants are at present net-long USD/CAD, with the ratio of merchants lengthy to brief standing at 1.59 to 1.

The variety of merchants net-long is 6.30% greater than yesterday and 21.88% greater from final week, whereas the variety of merchants net-short is 3.04% decrease than yesterday and seven.14% decrease from final week. The bounce in net-long curiosity has fueled the flip in retail sentiment as 60.19% of merchants had been net-long USD/CAD final week, whereas the decline in web brief place comes because the alternate fee bounces again from a contemporary month-to-month low (1.2816).

With that stated, the Fed fee resolution might hold USD/CAD above the 50-Day SMA (1.2854) so long as the central financial institution retains the present course for financial coverage, however the alternate fee might largely mirror the value motion from Could if it fails to carry above the shifting common.

USD/CAD Fee Each day Chart

Image of USD/CAD rate daily chart

Supply: Trading View

  • Consider, the failed try to check the November 2020 excessive (1.3371) has led to a near-term pullback in USD/CAD, with the alternate fee now buying and selling again above the 50-Day SMA (1.2854) after struggling to shut under the Fibonacci overlap round 1.2830 (38.2% retracement) to 1.2880 (61.8% growth).
  • In flip, USD/CAD might push in direction of the 1.2980 (618% retracement) space because it makes an attempt to retrace the decline from the beginning of the week, however the alternate fee might largely mirror the value motion from Could if it struggles to carry above the shifting common.
  • A detailed under the overlap round 1.2830 (38.2% retracement) to 1.2880 (61.8% growth) brings the 1.2770 (38.2% growth) space on the radar, with a transfer under the 200-Day SMA (1.2713) opening up the 1.2610 (50% retracement) to 1.2650 (78.6% growth) area.
  • Want a break/shut above 1.2980 (618% retracement) to convey the 1.3030 (50% growth) to 1.3040 (50% growth) area again on the radar, with the following space of curiosity coming in across the 1.3200 (38.2% growth) deal with.

— Written by David Track, Forex Strategist

Observe me on Twitter at @DavidJSong





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