- The dollar gains momentum during the American session amid risk aversion.
- DXY reverses sharply from 110.70 to 111.50.
- USD/CAD rebounds more than 120 points from daily lows.
USD/CAD rallied sharply from a two-day low around 1.3530 to 1.3658, hitting a fresh daily high. The rebound was triggered by a broader recovery in the dollar following the release of US economic data.
The dollar was falling, but reversed course sharply after the manufacturing PMI and labor market opening reports. Both reports exceeded expectations. Following the figures, US equities turned sharply lower, and US yields soared.
The Dow Jones falls 0.51% after a positive opening, while the SP500 falls 0.45%. The US 10-year yield rose from 3.92% to 4.07%, while the 2-year yield rose from 4.40% to 4.53%, hitting the highest since October 21.
The Canadian S&P Global Manufacturing fell from 49.8 to 48.8 below the 49.2 market consensus. Late Tuesday, Bank of Canada Governor Tiff Macklem will deliver a speech.
Market participants are focused on the FOMC meeting that started on Tuesday. The Federal Reserve is expected to announce a 75 basis point rate hike. “The decision will bring policy to a level where the Committee might feel more comfortable shifting to a more stable rate of rise. The exact timing, however, will largely depend on CPI data ahead of the December meeting. Powell may offer some clues in the post-meeting press release,” analysts at TD Securities said.
levels to watch
To the upside, above 1.3660, next resistance is at 1.3685 (31st Oct high), followed by 1.3755. To the downside, support could be found at 1.3605/00 and then at 1.3580 and the 1.3500 area. A daily close below 1.3500 would open the door to more losses.
Source: Fx Street
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