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USD/CAD Downward Channel In-Play - Selling Bias Dominates! 


The USD/CAD pair was closed at 1.30984 after placing a high of 1.31324 and a low of 1.30468. Overall the movement of the USD/CAD pair remained bearish throughout the day. The USD/CAD pair dropped for the fourth consecutive day and extended losses for the 7th consecutive week on Friday amid the broad-based US dollar weakness. The currency pair dropped to its lowest since 19 January 2020 on Friday after the dovish hints from Jerome Powell at Jackson Hole Symposium on Thursday.

Powell announced a dramatic shift in monetary policy and said that the Fed would allow inflation to overshoot a 2% target. The shift in monetary policy suggested that interest rates will remain low for the foreseeable expectation. The US yield curve has steepened in response and made the US dollar weak onboard that added the USD/CAD pair's a downward trend on Friday.

On the Canada side, the head of Central Bank of Canada, Governor Tiff Macklem, said on Thursday that during the economic crisis, central banks and fellow banks should make better connections and trust with average citizens as they have lost trust and facing uncertainty. He also said that people were losing trust in public institutions, and banks should explain to the public how bank's actions were serving the economy-wide objectives.

Meanwhile, on the data front, the Gross Domestic Product from Canada was released at 17:30 GMT that rose to 6.5% from the estimated 5.2% in June and supported the Canadian Dollar. The strong Canadian Dollar added further losses in the USD/CAD currency pair on Friday.

However, the WTI crude oil prices remained supportive of the USD/CAD pair and limited the additional losses as crude oil posted losses. The WTI crude oil dropped to $42.6 level on Friday amid the decreased risk sentiment and weakened the US dollar. The drop in crude oil also weighed on the Canadian Dollar that kept a check on additional losses in the USD/CAD pair.

On the data front, at the US side, at 17:30 GMT, the Core PCE Price Index for July weakened to 0.3% from the projected 0.5% and weighed on the US dollar. The Personal Spending for July rose to 1.9% against the anticipated 1.5% and supported the US dollar.

At 18:05 GMT, the Chicago PMI remained as expected 51.0 in August. At 19:00 GMT, the Revised UoM Consumer Sentiment rose to 74.1 from the anticipated 72.8 and supported the US dollar. Despite the US side's supportive data, the US dollar remained under pressure and kept the pair USD/CAD pair on the downside.

Daily Technical Levels

Support Resistance

1.3092 1.3161

1.3061 1.3199

1.3023 1.3230

Pivot point: 1.3130

The USD/CAD pair is trading bearish at 1.3068 level, within a downward channel extending support at 1.3046 and resistance at 1.3140 level. The 50 EMA suggests selling bias in CAD, while the bearish breakout of the 1.3046 level can extend selling until the 1.2990 level today. Let's look for selling trades below 1.3140 level today. Good luck!

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