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USD/CAD got rejected at the 1.3050 resistance!

Will the pair drop to its range support 500-ish pips away?

In case you missed it, global growth concerns and Fed interest rate hike speculations have propelled USD/CAD at least 500 pips higher in the last two weeks.

The bulls’ party kinda stopped at 1.3050, though, thanks to USD bears jumping in at May’s highs.

Coincidentally, 1.3050 is not far from a range resistance zone that USD/CAD bulls and bears have been respecting since August 2021.

USD/CAD: Daily

USD/CAD Daily Forex Chart

USD/CAD Daily Forex Chart

With Stochastic hanging out in the overbought zone and the last candlesticks hinting at a weakening bullish (if not a bearish) trend, you can bet that at least some dollar bears are thinking of shorting.

Earlier this month, the Bank of Canada (BOC) raised its interest rates by 50 basis points for the second meeting in a row.

BOC noted that the trajectory of inflation meant that “interest rates will need to rise further,” and that members are “prepared to act more forcefully” if economic reports point to inflation staying above BOC’s 2% target.

We’ll see if Canada’s retail sales and inflation reports scheduled this week will encourage speculations of a more hawkish BOC.

Headline retail trading is expected to jump by 0.8% even as core retail sales slow down from 2.4% to 0.5%. Meanwhile, consumer inflation is expected to have gone up from 0.6% to 1.0% in May with the closely-watched trimmed annual CPI rising from 5.1% to 5.4%.

Stronger-than-expected retail activity and consumer inflation numbers would encourage BOC members to raise their interest rates by at least another 50 basis points and maybe pencil in an aggressively hawkish tightening schedule.

Increased crude oil demand and prices won’t hurt CAD either. Unless we hear fresh lockdown prospects from China, traders will likely price in global reopening themes and more demand for the oil-related CAD.

Before you sell USD/CAD like there’s no tomorrow, you gotta make sure that traders are willing to dump USD! You never know when economic themes shift in favor of safe-havens like the dollar, ya know?

Not sure about USD/CAD’s short or long-term direction? Let MarketMilk help you see if USD/CAD is a buy or sell!

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