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USD/CAD jumps to 1.3000 after Powell as Wall Street tumbles

  • Risk aversion boosts the US dollar across the board.
  • Fed Chair Powell warrants more rate hikes and a tight policy until inflation is under control.
  • USD/CAD erases weekly losses after rising almost a hundred pips.

The USD/CAD bounced sharply on Friday after Fed Powell’s speech and amid a sharp decline in equity prices in Wall Street. The pair climbed from 1.2920 to 1.3010, hitting a two-day high.

A reversal of the US dollar across the board followed by the deterioration in market sentiment boosted USD/CAD. The pair is hovering around 1.3000 and could test Wednesday’s high at 1.3018. The loonie erased weekly gains.

No surprises, but volatility

Fed Chair Powell mentioned the central bank needs to keep raising rates and will persist at higher levels for some time. “We still expect the Fed to raise key interest rates from the current 2.50% to as high as 4% by year-end. Powell's statements also signal that he supports a front-loading of rate hikes. The sharp tightening of monetary policy, however, is likely to trigger a recession next year,” said Dr. Christoph Balz, Senior Economist at Commerzbank.

Powell’s comments triggered volatility despite offering no major surprises. The US 2-year bond yield stands at 3.42% (up 1.45%), and the 10-year rate at 3.03% (up just 0.23% and below the level it had before).

In Wall Street, the Dow Jones is falling by 1.60% and the Nasdaq by 2.45%. The risk-off mode boosted the dollar. The DXY had bottomed at 107.60, and at the time of writing, it is back at the 108.50 area.

The USD/CAD is about to end the week practically flat. It still faces resistance at the 200-week Simple Moving Average at 1.3025 while it is being supported by the 1.2890/1.2900 zone that contains the 20-day SMA.

Technical levels

USD/CAD

Overview
Today last price1.2986
Today Daily Change0.0062
Today Daily Change %0.48
Today daily open1.2924
 
Trends
Daily SMA201.2887
Daily SMA501.2916
Daily SMA1001.2838
Daily SMA2001.2765
 
Levels
Previous Daily High1.2976
Previous Daily Low1.2895
Previous Weekly High1.3009
Previous Weekly Low1.2769
Previous Monthly High1.3224
Previous Monthly Low1.2789
Daily Fibonacci 38.2%1.2926
Daily Fibonacci 61.8%1.2945
Daily Pivot Point S11.2888
Daily Pivot Point S21.2851
Daily Pivot Point S31.2807
Daily Pivot Point R11.2968
Daily Pivot Point R21.3013
Daily Pivot Point R31.3049

Author

Matías Salord

Matías started in financial markets in 2008, after graduating in Economics. He was trained in chart analysis and then became an educator. He also studied Journalism. He started writing analyses for specialized websites before joining FXStreet.

More from Matías Salord
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