The downtrend is not letting up in the USD/CAD so far as the Asian session has opened for the week and the loonie continues to hammer the dollar. Not completely surprising the the slight bounce being seen on the daily time frame.
Consider that the trading range for Friday took the USD/CAD from a high of 0.9549 to the 0.9446 low that has been tested with the current 0.9445 low. The subsequent bounce reflects the slightly weakness seen in the crude oil market and the dollar’s stabilization just above the 73.00 major psychological level.
While there may be a temporary reprieve for the pair if there is a slight correction higher, use the near-term bullishness to identify where the trend could exhaust at resistance and short into the pressure. For the daily time frame it would need a considerable bounce to one of three levels:
1) the 20 period SMA
2) the 34 period EMA low
3) the downtrend line resistance of the Falling Wedge.
Fundamentally, the loonie is gaining on the greenback mainly due to the expectations that the Bank of Canada will hike interest rates before the Federal Reserve does. But the Canadian economy did how some signs of flattening as the GDP came in (as expected) at 0.5%. Despite its strength against the greenback, compared to other comm-dolls the loonie is lagging the Australian Dollar. This is because the Australian economy continues to benefit from it’s tight connection to China’s growth. The Canadian Dollar is more tied to the the U.S. Dollar….need I say anything more?
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