The USD CAD broke on Tuesday as traders took profits following afive-day rally. The recent strength has been triggered by chatter thatthe Fed may have to raise rates as the economy begins to heat up.
The USD CAD broke on Tuesday as traders took profits following a five-day rally. The recent strength has been triggered by chatter that the Fed may have to raise rates as the economy begins to heat up. Today’s weakness was triggered by speculation that the talk of a rate hike may have been premature. In addition, traders were hesitant to add on to positions in the face of another round of Treasury auctions.
Strength in the oil complex also drove the USD CAD lower. Global investors are betting on inflation and buying commodities to protect themselves. Heavy speculation by funds is helping to support the rise in crude oil. Traders will be watching inventory supply numbers for any sign of a drawdown. This would also be a signal that demand is increasing as the economy recovers.
Technically, last week’s closing price reversal bottom was confirmed on Monday by the follow-through buying. The weak close led to another sell-off on Tuesday. The main trend remains down but holding a correction back to 1.1040 to 1.0980 will be a sign that the buying is greater than the selling at current levels.
Tuesday trading action took the market into this range, now it is up to the buyers to step up and start another up move. If buyers step in, then look for a rally to drive this market to at least 1.1413.
If this market fails to hold 1.0980 then look for a break to the low at 1.0783. A failure to hold this test would resume the downtrend and make 1.1290 a new main bottom.