Fade USD/CAD Rally

Fade USD/CAD Rally

Fade USD/CAD Rally

Wild swings were seen in USD/CAD today, which broke below 1.2900 and hit a 5-month low before recovering quickly and aggressively to end the day near 1.3000. The intraday reversal in the currency pair caught everyone by surprise because there was no news or catalyst. Canada’s economy grew 2 times faster than anticipated in the month of January and this helped lift year over year GDP growth to 1.5% from 0.6%. Oil prices also edged higher while the U.S.-Canadian 2 year yield spread moved in favor of losses in USD/CAD. Policymakers don’t appear alarmed with the rise in the loonie with Bank of Canada Deputy Governor Patteron even citing loonie weakness as a source of strength for exports this morning. As such, we believe that the latest USD/CAD rally should be faded as the pair is likely to make another run for its 5 month lows.

Technically, as long as USD/CAD remains below 1.32, the downtrend is intact. In fact as long as it holds below its former support level of 1.3000, the next stop should be the October low near 1.2830.

Chart Of The Day

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