August 19, 2021 13:54:19
A sea of red in equity markets has given a risk-off bid to safe haven assets. While high beta currencies continue to sink, dollar strength is in full effect even if some were disappointed by the less hawkish-than-hoped FOMC minutes last night. The re-rating of global growth is key with USD set to maintain an upwards trend into the start of the Fed’s tightening cycle.
Plunging commodities are seeing oil decline over 2% with the general risk backdrop further weighing on CAD. We did see Canadian inflation data surprise to the upside yesterday, but attention is focused elsewhere and policymakers at the Bank of Canada see these price gains as temporary. Otherwise, the continuation of the robust economic recovery should keep the BoC on track to wrap up QE by the end of the year.
Loonie pushes into cycle highs
USD/CAD had been tracking sideways from late July between 1.2423 and 1.2604. But the four-day win streak has propelled it higher and bulls have their eyes firmly set on the spike high from last month at 1.2807. Beyond here are multiple levels of longer-term resistance around 1.30.
Prices have now pushed into the upper Keltner band and the daily RSI is touching overbought territory. We should see a pullback now with initial support at the psychological 1.27 level and then at the top of the range at 1.2604. The 200-day SMA resides just below here at 1.2560.
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