HomeForex MarketBearish USD/CAD: Prime Commerce Alternatives

Bearish USD/CAD: Prime Commerce Alternatives

Amid heightened geopolitical and elementary dangers, the safe-haven enchantment of the US Greenback and the hawkish rhetoric of the Federal Reserve has allowed USD to strengthen in opposition to its main counterparts, limiting Canadian Greenback features.

Though an inflow of fiscal stimulus and low rates of interest has softened the financial blow of the Covid-19 pandemic, commodity provide constraints have weighed on vitality costs, driving inflation increased.

With the Fed and the BoC now implementing extra aggressive financial tightening measures, buyers have priced in a sequence of charge hikes for each central banks, which is able to doubtless contribute to cost motion in Q2 if both financial institution diverges from the anticipated path.

I consider that the problem for each the Fed and the Financial institution of Canada might be to make sure that the withdrawal of QE doesn’t disrupt monetary stability which (given the present elementary backdrop) stays a difficult activity.

Though I consider that commodity costs will assist the CAD, there are a number of eventualities that will unfold.

Firstly, if rising commodity costs and additional sanctions in opposition to Russia persist, the commodity pushed Canadian Greenback may regain confidence in opposition to the dollar, leading to additional downward strain on the pair. With that being mentioned, if the continuing battle stays unresolved, additional intervention from world leaders and an escalation within the depth of the conflict may see an increase in danger aversion, permitting USD to understand additional.

USD/CAD Technical Evaluation

From a technical standpoint, value motion for Q2 could proceed to commerce inside confluent zones, shaped by the important thing Fibonacci ranges of the historic transfer (2002 – 2007).

USD/CAD Weekly Chart

Chart ready by Tammy Da Costa utilizing TradingView

After rebounding off of the Might 2021 low on the key psychological stage of 1.200, USD/CAD loved 4 months of consecutive features earlier than operating right into a wall of resistance round 1.263, the 50% retracement of the above-mentioned transfer. As value motion at present stays muted round this stage, costs stay well-below the 200-week MA (transferring common) suggesting that the downward trajectory could proceed to carry, offering an extra layer of resistance for USD bulls at round 1.305.

Though the CCI (commodity channel index) has fallen into overbought territory, elevated commodity costs could present bears with sufficient momentum to drive costs again in the direction of the October 2021 low of 1.23 with the subsequent massive stage of assist holding agency at 1.200.

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