The USDCAD has settled near 1.2600 after logging a near three-week low at 1.2557 on Friday, which extended losses that were sparked by last Wednesday’s dovish-leaning FOMC minutes. The pressure favours the downside in USDCAD, anticipating the BoC to make a second 25 basis point rate hike in October, which would take the policy rate to 1.00%. We see two more 25 basis point rate increases next year, a slow-go approach to tightening but one that should keep return the Canadian dollar to fairer values, with the drag from historic low oil prices in recent years having now passed. I suggested in my 2017 Outlook that the CAD could be the commodity currency to watch this year.
Meanwhile, the lower time frames offered a long position on the H1 this morning as it closed over the 20 period moving average and latest fractal high (1.2595), target is the 14 period ATR at 1.2609. This zone is also a key level on the H4 and Daily time frames. The daily time frame closed the week below the 20 day moving average and a close today in the sell zone above would generate a short position with a target back down at 1.2500.
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Senior Market Analyst
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