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Trends & Analysis
News

Gold Price Takes a Hit Amid Trump Trade Expectations

News

Should Pinterest pique your interest?

News

Euro falls on tariff concerns, Bitcoin nears $90K

News

Gold records biggest weekly decline in 5 months

News

Crude oil rebounds as Trump wins US elections

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US stocks at record highs on Trump’s election win

Asset Watch

Has the CAD rally run its course?

Wednesday, July 4, 2023

Following several months of decelerating year-over-year (YoY) inflation increasing investors’ optimism, volatility has largely gone missing across the financial markets. Risk-on assets have outperformed their risk-off counterparts, however, with base effects ending after the June CPI data is released on Jul. 12, U.S. inflation could become problematic again and help flip the script.
If so, the Canadian dollar could be on the defensive, and it would be the greenback’s time to shine. From a technical perspective, the setup is quite constructive. The USD/CAD bounced off its weekly rising support line (the grey line), which halted four-straight weeks of losses.

The currency pair’s 100-week moving average acted as resistance during the December 2021 and February/March 2022 rallies, while the August 2022 drawdown ended near the key level. More importantly, the USD/CAD’s 100-week MA is only slightly below the rising support line and provides another layer of defence for the bulls.

Q1 U.S. real GDP was revised upward from 1.3% to 2% on Jun. 29, and the Atlanta Fed expects Q2 real GDP to come in at 1.9% (updated on Jul. 3). U.S. economic growth remains resilient, and the fundamental strength gives the Fed more leeway to raise interest rates. As a result, continued hawkish policy should be bullish for the currency pair.

Could the USD/CAD retest its recent highs near 1.365, or will a breakdown below 1.305 be the next major move?


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