USDCAD is trading down on the day with help from a double top. Can sellers push further?
In a post yesterday, I commented that the USDCAD had been trending higher day after day—with only a handful of declines since May 1—and quipped that the pair’s price moving higher might soon join death and taxes as one of life’s certainties. Well, I may have jinxed the buyers.
The USDCAD is lower in trading today, helped by the decline in U.S. yields following the softer-than-expected PCE data. Technically, the rally stalled at 1.4247, matching yesterday’s high and creating a double-top. That gives sellers—who have been dying to pick a top—something to lean against. The play for the bears is straightforward: sell against the high and hope that profit-taking from longs and fresh short positions lead to a deeper correction.
For that bearish scenario to gain traction, however, downside momentum needs to build and key support levels need to break. The first major target is the 100-hour moving average at 1.41966. Since early May, that moving average has repeatedly acted as a launch point for new rallies, with dips attracting willing buyers. If sellers are going to wrestle control away from the buyers, they need to get below—and stay below—that moving average.
Absent a sustained break of the 100-hour MA, the double-top remains resistance, but the buyers are still more in control and the sellers are not really winning. Watch the 100-hour moving average for clues today and going forward.
The video above outlines the key levels in play and shows and explains why they are so important for both buyers and sellers.
Fundamentally, the Bank of Canada’s June meeting minutes reinforced a cautious, wait-and-see stance. Policymakers agreed that the Canadian economy remains weak, with excess supply and labor market slack, although they stopped short of declaring a recession. Officials noted that little had changed since April, suggesting there was no urgency to alter policy. On inflation, the Governing Council viewed price pressures outside of energy as generally contained but highlighted two-way risks ahead. The Bank indicated it could cut rates if new U.S. trade restrictions further weaken growth, while a broader spread of energy-driven inflation pressures could lead to rate hikes. Overall, the minutes confirmed that the BoC remains data dependent and sees risks to both growth and inflation.
This article was written by Greg Michalowski at investinglive.com.