USD/CAD: bulls hunting down the 1.3400 handle and 76.4% Fibo of the summer's downtrend
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- USD/CAD has rallied to the best levels since July as the dollar picks up the trade war saga bid while oil drops from the skies, plunging below the 61.8% fibo retracement support level and tests the Feb 2017 highs.
- USD/CAD is currently trading at 1.3255 and has scored a high of 1.3272 from a low of 1.3155.
USD/CAD has been resuming the 2018 uptrend in recent weeks, reversing the summer lull from 2018 1.3387 highs that took the pair down to test 1.2782 in September. However, the pick up in Fed sentiment in October, despite a more hawkish outcome of the BoC of late, kicked off a correction which has now extended into a reversal due to a rout in the price of oil.
There has been an oversupply situation in the oil market which is now set to grow as consumer demand falls further due to diminishing global growth forecasts. The oil markets have defined as at least a 20% pullback from their recent four-year high in early October. The Canadian economy relies heavily on income and the BoC will be monitoring the effects on inflation which is being picked up by traders and hence the bid in USD/CAD - (Fed/BoC diversion bid).
Sino-US trade spat. should favour the dollar
One of the major concerns on investor's minds is the Sino-US trade spat. Analysts at Rabobank noted that the APEC meetings over the weekend brought a strong indication that it is too early to assume that the end of their trade dispute.
"The downside risks to growth from trade wars are likely to keep risky assets under pressure and this is likely to ensure some support for the USD."
USD/CAD levels
The pair has reached R3 up at the highs having broken through the key 61.8% fibo which held on the initial tests, as to be expected. Analysts at Scotiabank argued that the short-term technicals are neutral—bullish: "The ascending channel from early October has a floor just below 1.3150 and a ceiling in the mid-1.33s." A break of that ceiling exposes the target of 1.3400 and 76.4% fibo of the summer's downtrend to recent lows. RSI has room to go still.
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