USDCAD retraces 50% of overnight losses

2 March, 2018

The dollar remained on a back foot following Trump’s apparent hitting of the trade way button, although it remains to be seen how targeted his proposed tariffs on steel and aluminium will be. Fed policy expectations remains in the spotlight, too, with hawkish remarks from Fed member Dudley serving to offset the impact from Fed chairman Powell’s testimony before the Senate yesterday, where he chose to walk back some of the hawkish notes he struck at his House testimony earlier in the week. EURUSD logged a three-day high of 1.2287 during the Asian session earlier, extending the rebound from yesterday’s seven-week low at 1.2154. Cable also posted a new rebound high, driven by dollar softness. USDJPY fell for a third consecutive day, driven lower both by a softer dollar and by yen outperformance and after BoJ governor Kuroda reportedly said before parliament today that the central bank is looking at possible exit from stimulus measures around fiscal 2019. USDJPY posted a two-week low at 105.71, while EURJPY forayed into five-and-a-half-month low territory and AUDJPY, a cross which has been under particular pressure of late mid the risk-off sentiment in global markets, extended to a fresh nine-month low, at 82.04.

However the bigger mover despite Yen was Canadian Dollar as well.  USDCAD faced a sharp down movement by 85 pips down from the new high of the year at 1.2895. The pair has been subjected to mixed leads over the last day, with Trump’s tariffs proposals seen as negative for the Canadian dollar, although it remains to be seen if the U.S. administration will target the proposed levy on China, exempting close allies, or what impact it might have on the NAFTA renegotiation. However, the pullback was limited, since pair has already retrace 50% of it and it is currently traded at 1.2850. Hence, technically-wise the USDCAD remains strong, if we consider the rally seen in February above the 200 DAY SMA, and with 20-DAY MA crossing sharply the 50-DAY SMA. Intraday indicators confirm the bullish momentum as well, with RSI crossing above neutral and MACD remaining at the positive terittory despite overnight’s performance.

Therefore, based on the above, an intra-day Long position was taken once the pair crossed the 20-period SMA in the hourly chart at 1.2840. Targets were set at upper Bollinger Band pattern at 1.2870 and at 2-months high at 1.2895.  Support comes at 1.2820.


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