|

USD/CAD bulls eye a run towards 1.3700 as risk sentiment sours

  • Risk sentiment has soured as banking worries resurface, resulting in a resurgence in the US Dollar.
  • USD/CAD bulls drive toward the falling wedge target. 

USD/CAD rallied on Tuesday from a low of 1.3524 to a high of 1.3637 and is up over 0.7% on the day. The US Dollar is firmly bid as risk sentiment soured in Europe on returning banking worries and is sinking all ships with the high beta currencies, such as CAd, taking the brunt of it. 

The US Dollar index, DXY, was last up 0.6% at 101.92, a touch off the highs at 101.949 that were bourne out of worrying earnings from First Republic Bank and UBS. Plunging deposits at First Republic Bank have reignited worries over the health of the banking sector and UBS reporting a 52% slide in quarterly income as it prepares to swallow fallen rival Credit Suisse has not helped to encourage any hunger for risk in the financial markets. 

Meanwhile, the price of oil, one of Canada's major exports, has dropped with WTI falling from a high of $79.02bbls to a low of $76.57bbls. US Dollar strength today is pressuring energy prices and the concerns that a slowdown in the global economy will curb energy demand are weighing on the black gold which is hurtling towards the OPEC production cut bullish gap´s origin near $75.65bbls, WTI. 

Domestically, the Bank of Canada is due to release its monetary policy deliberations for the April 12 interest rate decision on Wednesday and these will be parsed for any indication of a lower bar to resume tightening after the more hawkish messaging over the last two weeks, analysts at TD Securities explained. The analysts added that the BoC´s governor, Tiff Macklem, has already acknowledged discussing hikes in his media roundtable, and argued that ´´a more hawkish tone from the minutes could see markets price a higher probability of additional rate hikes in upcoming BoC meetings.´´

To note, the central bank left its benchmark rate on hold for a second straight meeting at a 15-year high of 4.50% and raised its growth forecast for 2023 to 1.4% from 1.0% in January.

USD/CAD technical analysis

Adverse risk sentiment and the subsequent rally in the Greenback on Tuesday have propelled the price toward the target without looking back. USD/CAD has broken old trendline resistance that would now be expected to act as a counter-trendline for the bulls to lean against should there be a meanwhile and significant correction.

However, the daily candle is a strong momentum candle so if there is profit-taking at the end of the day, then a correction may only be a shallow one leaving a small wick. We could see the bulls re-engaged for the next bullish impulse on Wednesday to the target, 1.3695. This is well within reach for a single day considering the daily ATR of 78 pips.

With that being said, a firmer correction would leave the trendline support and then 1.3570, 1.3550 and the 38.2% Fibonacci at 1.3532 ahead of a 50% mean reversion near 1.3500 at risk:

Author

Ross J Burland

Ross J Burland, born in England, UK, is a sportsman at heart. He played Rugby and Judo for his county, Kent and the South East of England Rugby team.

More from Ross J Burland
Share:

Markets move fast. We move first.

Orange Juice Newsletter brings you expert driven insights - not headlines. Every day on your inbox.

By subscribing you agree to our Terms and conditions.

Editor's Picks

EUR/USD rebounds after falling toward 1.1700

EUR/USD gains traction and trades above 1.1730 in the American session, looking to end the week virtually unchanged. The bullish opening in Wall Street makes it difficult for the US Dollar to preserve its recovery momentum and helps the pair rebound heading into the weekend.

GBP/USD steadies below 1.3400 as traders assess BoE policy outlook

Following Thursday's volatile session, GBP/USD moves sideways below 1.3400 on Friday. Investors reassess the Bank of England's policy oıtlook after the MPC decided to cut the interest rate by 25 bps by a slim margin. Meanwhile, the improving risk mood helps the pair hold its ground.

Gold stays below $4,350, looks to post small weekly gains

Gold struggles to gather recovery momentum and stays below $4,350 in the second half of the day on Friday, as the benchmark 10-year US Treasury bond yield edges higher. Nevertheless, the precious metal remains on track to end the week with modest gains as markets gear up for the holiday season.

Crypto Today: Bitcoin, Ethereum, XRP rebound amid bearish market conditions

Bitcoin (BTC) is edging higher, trading above $88,000 at the time of writing on Monday. Altcoins, including Ethereum (ETH) and Ripple (XRP), are following in BTC’s footsteps, experiencing relief rebounds following a volatile week.

How much can one month of soft inflation change the Fed’s mind?

One month of softer inflation data is rarely enough to shift Federal Reserve policy on its own, but in a market highly sensitive to every data point, even a single reading can reshape expectations. November’s inflation report offered a welcome sign of cooling price pressures. 

XRP rebounds amid ETF inflows and declining retail demand demand

XRP rebounds as bulls target a short-term breakout above $2.00 on Friday. XRP ETFs record the highest inflow since December 8, signaling growing institutional appetite.