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USD/CAD – Is this Reversal Real?
USD/CAD – Is the Reversal Real?
After rising strongly in the last 2 weeks of September, USD/CAD reversed fast and hard last week. The sell-off in the currency gained traction today and if this week’s Canadian economic reports are weak, we could see USD/CAD test 1.30. The change in trend was driven by a combination of weaker U.S. data and a rebound in oil prices. Canada’s trade balance and IVEY PMI numbers are scheduled for release tomorrow followed by the employment report on Friday. However we believe that USD/CAD will find support at 1.30 because economists are looking for a larger trade deficit and weaker manufacturing activity. Oil prices rebounded in late August but remain very low compared to June and July.
Technically, 1.30 is a psychologically significant support level. There’s no major support from current levels until that point but 1.30 is extremely important. If USD/CAD breaks below 1.2950, the August lows, it should be smooth sailing to 1.2860. On the upside if support is found at 1.30, resistance for USD/CAD becomes 1.31.