Canadian Dollar Speaking Factors
USD/CAD clears the November 2020 excessive (1.3371) because it extends the advance following the Federal Reserve interest rate decision, and the alternate price might try to check the July 2020 excessive (1.3646) because the Relative Energy Index (RSI) climbs into overbought territory for the primary time this yr.
USD/CAD Rally Pushes RSI Into Overbought Zone for First Time in 2022
USD/CAD trades to a recent yearly excessive (1.3544) because it extends the advance from the 50-Day SMA (1.2999), and the alternate price might proceed to carve a sequence of upper highs and lows so long as the RSI holds above 70.
Because of this, USD/CAD might proceed to trace the constructive slope within the shifting common because the Federal Open Market Committee (FOMC) retains its present method in combating inflation, and the Dollar might proceed to outperform its Canadian counterpart over the near-term because the Fed’s Summary of Economic Projections (SEP) present a steeper path for US rates of interest.
In flip, USD/CAD might proceed to commerce to recent yearly highs forward of the following Financial institution of Canada (BoC) rate of interest choice on October 26 because the FOMC pursues a restrictive coverage, and an additional advance within the alternate price is prone to gas the lean in retail sentiment just like the conduct seen earlier this yr.
The IG Client Sentiment report reveals solely 30.45% of merchants are at the moment net-long USD/CAD, with the ratio of merchants quick to lengthy standing at 2.28 to 1.
The variety of merchants net-long is 14.88% decrease than yesterday and 1.20% decrease from final week, whereas the variety of merchants net-short is 13.80% decrease than yesterday and a pair of.60% decrease from final week. The decline in net-long place comes as USD/CAD trades to a recent yearly excessive (1.3544), whereas the drop in net-short curiosity has performed little to alleviate the crowding conduct as 32.91% of merchants had been net-long the pair earlier this week.
With that stated, USD/CAD might proceed to trace the constructive slope within the 50-Day SMA (1.2999) because it extends the rebound from the shifting common, and the alternate price might try to check the July 2020 excessive (1.3646) so long as the RSI holds in overbought territory.
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USD/CAD Fee Each day Chart
Supply: Trading View
- USD/CAD trades to a recent yearly excessive (1.3544) because it extends the sequence of upper highs and lows from earlier this week, with the advance from the 50-Day SMA (1.2999) pushing the Relative Strength Index (RSI) into overbought territory for the primary time in 2022.
- The bullish value motion in USD/CAD might persist so long as the RSI holds above 70, however want an in depth above the 1.3540 (23.6% retracement) area to convey the 1.3630 (38.2% retracement) to 1.3660 (78.6% enlargement) space on the radar, which traces up with the July 2020 excessive (1.3646).
- Nevertheless, failure to shut above the 1.3540 (23.6% retracement) area together with a transfer beneath 70 within the RSI might result in a pullback in USD/CAD, with a push beneath the 1.3400 (23.6% enlargement) deal with elevating the scope for a transfer in direction of the 1.3290 (61.8% enlargement) to 1.3310 (50% retracement) space.
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— Written by David Track, Foreign money Strategist
Observe me on Twitter at @DavidJSong