USD / CAD is heading towards the highest level since April after Macklem’s dovish comments from the BOC
- USD / CAD has extended its gains, heading towards the July high of 1.2591.
- BOC Governor Macklem said he would not necessarily increase rates automatically.
- The US dollar is benefiting from a climate of risk aversion in the markets.
The USD / CAD It has hit a daily high of 1.2585, the highest since July 8, a one-week high. The peak recorded last week was 1.2591 and if USD / CAD breaks above that line, it would trade at the highest levels since April.
The loonie is under pressure after Bank of Canada Governor Tiff Macklem told the Canadian Press that the rise in inflation could be temporary but could otherwise raise rates. However, he stressed that “it is not automatic” and that the BOC will have to see what is needed.
Macklem’s reluctance to raise borrowing costs has weighed on the Canadian dollar. It comes a day after the BOC cut its bond-buying scheme by C $ 1 billion a week, as expected, and surprised investors by lowering its forecast for 2021.
The US dollar is gaining ground amid a pessimistic market environment. Macklem’s US peer, Federal Reserve Jerome Powell, repeated his stance that the price increases are temporary. Previously, US data mostly disappointed estimates, which weighed on sentiment and supported the safe-haven dollar. Unemployment claims reached 360,000 in the week ending July 9 and industrial production rose just 0.4% in June.
On the other hand, WTI crude oil has rebounded from the lows of $ 71 that it reached earlier in the day, allowing the loonie to refrain from lower levels and escape from hitting the high in around 11 weeks.
USD / CAD technical analysis
USD / CAD is bullish, trading above the 50, 100 and 200 simple moving averages and enjoying bullish momentum. The Relative Strength Index is still below 70, therefore it is out of oversold conditions.
Above 1.2591, the next lines to watch are 1.2560 and 1.26. Support awaits at 1.2510, 1.2440 and 1.23.