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USD/CAD rallies to fresh YTD highs at around 1.3070s on broad USD strength

  • The Loonie sustains substantial weekly losses of 2.04%.
  • An upbeat market mood and broad US dollar strength lift the USD/CAD.
  • USD/CAD Price Forecast: A close above 1.3078 would pave the way towards October 2020 highs at around 1.3389.

The USD/CAD soars above the 1.3000 mark for the first time since May 12 and records a fresh YTD high at around 1.3078 after Wednesday’s US Federal Reserve 75 bps rate hike, which did not catch traders off guard due to an article on the WSJ on Monday that foresaw an increase of that size. The USD/CAD initially reacted downwards to 1.2880 but was seen as an opportunity for USD/CAD buyers, which lifted the pair higher. At the time of writing, the USD/CAD is trading at 1.3045, up by 0.81%.

Overall US dollar strength, a tailwind for the USD/CAD

The market mood remains upbeat as global equities trimmed some weekly losses. In the FX space mood is mixed, with high-beta currencies down, except for the NZD and the GBP. In the case of safe-haven peers, the JPY is getting battered after the BoJ committed to its ultra-loose dovish stance.

In the meantime, the US Dollar resumed its uptrend and is gaining 1.04%, trading at 104.877. US Treasury yields are taking a breather, particularly the US 10-year benchmark note, down eight basis points, yielding 3.224%.

Data-wise, the Canadian docket reported the May Producer Price Index (PPI), which rose 15%, lower than the 16.4% reading but remains higher. Raw Material Prices increased by 37.4% YoY, though lower than 38.3% in April.

Later, the US docket featured May Industrial Production, which rose by 5.8% YoY, lower than April’s reading, adding to signs of an economic slowdown.

Sources cited by the WSJ said, “The pace at which everything is changing is quite alarming.” Sources added that the economy still stands on fairly solid ground to withstand inflation, supply-chain issues, and rising interest rates.

Meanwhile, Minneapolis Fed Neil Kashkari said that he supported 75 bps in June and could support another in July. He added that a prudent strategy might be to continue with 50 bps increases. St. Louis Fed President James Bullard said a soft landing is feasible if the post-pandemic shift is done well.

USD/CAD Price Forecast: Technical outlook

With the USD/CAD trading at fresh YTD highs, switching to the weekly chart is needed to determine what’s next for the major. It’s worth noting that the USD/CAD is trading above the 200-week simple moving average (SMA), a strong bullish signal that could lift the pair towards October’s 2020 highs at around 1.3390. Nevertheless, the USD/CAD is retreating below the May 12 high at 1.3076.

A daily close below 1.3078 would open the door for further losses. That said, the USD/CAD first support would be the 1.3000 mark. Once cleared, the following support would be the June 16 1.2860 cycle low, followed by 1.2800.

Key Technical Levels

USD/CAD

Overview
Today last price1.3045
Today Daily Change0.0089
Today Daily Change %0.69
Today daily open1.2951
 
Trends
Daily SMA201.2735
Daily SMA501.2759
Daily SMA1001.2715
Daily SMA2001.2669
 
Levels
Previous Daily High1.297
Previous Daily Low1.2861
Previous Weekly High1.2813
Previous Weekly Low1.2518
Previous Monthly High1.3077
Previous Monthly Low1.2629
Daily Fibonacci 38.2%1.2929
Daily Fibonacci 61.8%1.2903
Daily Pivot Point S11.2885
Daily Pivot Point S21.2818
Daily Pivot Point S31.2775
Daily Pivot Point R11.2994
Daily Pivot Point R21.3037
Daily Pivot Point R31.3104

Author

Christian Borjon Valencia

Markets analyst, news editor, and trading instructor with over 14 years of experience across FX, commodities, US equity indices, and global macro markets.

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