July 19, 2021 14:24:19
The loonie is the weakest major currency on the board today, hit by plunging crude and stocks. Any positives for CAD – like positive vaccination news and the Bank of Canada’s policy stance – have been consumed by thin markets and exaggerated moves, typical of summer markets. That means low liquidity, little risk taking and high volatility.
USD/CAD has reacted strongly in this environment, surging to five-month highs above 1.28 earlier in today’s session. The underlying USD trend was looking good before today’s move, with higher highs and higher lows since mid-June. This uptrend came after the pair failed to take out long-term support around 1.20 from where a rounding bottom base developed.
The aggressive move north today has punctured the upper Keltner band and the daily RSI is also overbought so we should expect to see some consolidation and possible retracement. First major support comes in at the 200-day SMA at 1.2625, with minor support at the April high at 1.2654. But the broad momentum in the dollar rally and risk off mood could see prices extend higher with the late January high at 1.2881 in focus ahead of the 1.30 area.
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