USD/CAD battles 1.3600 as bears stay in control ahead of BOC
|- USD/CAD is consolidating the downside ahead of the BOC expected 75 bps hike.
- Upbeat Asian markets take the wind out of the USD recovery, WTI trades listlessly.
- The pair looks to test the 1.3565 support after the rising wedge breakdown.
USD/CAD is trading on the defensive while keeping its range around the 1.3600 level, as the US dollar recovery fizzles out amid a strong advance in Asian equities. Investors shrug off the drop in the S&P 500 futures, led by the downbeat earnings reports of Microsoft and Alphabets after the US markets close.
The lackluster performance in the WTI price is also doing little to help the loonie extend its previous rally, as the US oil remains confined around the $84.50 mark. The major also remains weighed down by weaker US Treasury yields amid fading hopes of the Fed continuing its aggressive rate hike track amid slowing economic activity in America.
All eyes now turn towards the Bank of Canada (BOC) rate hike decision, with a 75 bps rate increase fully baked in after another beat in the Canadian inflation data. However, economists are expecting the central bank to shift towards a dovish pivot, in the face of growing recession risks. With inflation still hot, the BOC could stick to its pledge of the need for further rate increases until inflation is brought down.
From a short-term technical perspective, USD/CAD is holding the lower ground after confirming a rising wedge breakdown last Friday.
That said, the downside remains exposed towards the monthly lows at 1.3502. Ahead of that, the October 6 low at 1.3565 could come to buyers’ rescue.
The 14-day Relative Strength Index (RSI) has pierced through the midline for the downside, implying that the tide has turned against bulls.
USD/CAD: Daily chart
On the flip side, any upside attempt will need to clear the mildly bearish 21-Daily Moving Average (DMA) at 1.3711. Acceptance above the latter will put the wedge support-turned-resistance at 1.3758 under threat.
Daily closing above the latter will call for a fresh uptrend towards the 1.3800 round figure.
USD/CAD: Additional levels to consider
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