USD/CAD moves towards a test of the 100-day moving average
The Canadian dollar continues to suffer a beating over the past two days as USD/CAD trades at the highs for the session and moves towards a test of the 100-day MA (red line) @ 1.3065. Weaker oil prices overnight was one of the reasons weighing on the loonie (alongside dollar strength from the hawkish Fed minutes) and poor risk sentiment so far to begin the session isn’t really helping with the mood either.
For USD/CAD, buyers have attempted to break the 100-day MA on several occasions since last month but so far have fallen short. Will this time prove to be any different?
Surging oil prices look to be taking a bit of a breather at this point and with the dollar regaining some poise on the back of the Fed minutes yesterday, the stars are aligning for a move higher in the pair.
Last week, the dollar suffered as the correlation between the greenback and risk broke down and as stocks recovered from the lows yesterday, so did the dollar but there’s also the added support from the hawkish Fed to add to that.
Given that context, there will start to be more correlation moving forward between rising yields and dollar strength (as markets will look to price in more Fed rate hikes over time) and that will lend further support for the greenback in time. Not to forget we’re approaching that time of the year where funding demand for the dollar also grows greater.
But for the immediate term, there’s still hints of dollar strength crossing here in Europe from the Fed’s hawkishness and unless equities capitulate, it shouldn’t derail the dollar’s momentum for the time being.
As for USD/CAD, a break of the 100-day MA will see a move towards the August highs around 1.3175 before the September highs at around 1.3200 to 1.3225 will be called into question.
Also, is it a coincidence that the loonie also began its decline after Canada legalised recreational marijuana yesterday? 😀 😀 😀