Loonie Turns Lower
As we roundup another week’s winners and losers let’s once again spare a thought for those poor souls who found themselves on the side lines of yet another great trade this week. It’s often thought that the worst thing in trading is taking a loss. However, as anyone who’s been through it will tell you, a far sharp sting is that of the winning trade not taken. Missing out on a winning trade is a particular sort of pain that can be just as difficult, if not more so, to handle than a loss. So, this week the traders I’ve been chatting with are talking mainly about the pullback in USD from last week’s highs and there is one pair in particular that’s being discussed and that is USDCAD which has dropped over 200 pips. So, as ever, if you caught the move – well done! And if you missed it, there’s always next week.
What Caused The Move?
Following the USD rally last week in response to a hawkish FOMC which saw the Fed revising higher its growth and inflation forecasts and upgrading its dot plot forecasts, USD pulled back this week in response to comments from Fed chairman Powell. Powell told the Senate that the Fed was not concerned over the current and projected rise in inflation and reaffirmed his view that any spike would be transitory and not require a shift in policy.
Powell once again sticking to his guns and downplaying inflation expectations was enough to take the wind out of the Dollar. On the other hand, with the BOC already into tapering and with the market expecting further tapering to be announced in coming months, CAD was chief among the currencies to benefit from the Dollar decline.
The lift in oil prices this week, which have continued higher amidst a weaker Dollar and a further bullish report from the EIA, also helped create some downside in USDCAD. With risk assets remaining well bid, CAD has been able to recover the losses from last week. Let’s take a look through the technical picture.
Technical Views
USDCAD
The rally in USDCAD saw price breaking above the bear channel top and trading up into a test of the 1.2469 level. Sellers stepped in there and saw price reversing lower back down to the 1.2243 level which is holding as support for now. With MACD and RSI bullish, the focus is on further upside for now unless price breaks back below the 1.2243 level.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.