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USD/CAD: The bears are approaching the support of the 200-day SMA

  • USD/CAD pulls back to two-month lows, with the 200-day SMA “safety net” just below.
  • Hopes of a less aggressive Fed and risk appetite continue to weigh on the pair.
  • A rebound in oil prices benefits the CAD and also contributes to capping the pair.

The pair USD/CAD remains trapped in a tight range during the European session on Thursday. The pair moves around the area of 1.2770-1.2765just a few pips above the two-month low and the 200-day SMA.

The US dollar finds fresh sales and remains within striking distance of its lowest level since late June, set in the wake of the softer US consumer inflation numbers on Wednesday. This, in turn, acts as a headwind for the USD/CAD pair and caps the pair near the breakout point of the 100-day SMA, now turned into resistance.

Following the release of the weaker-than-expected July CPI report in the US, investors rushed to cut expectations for a 75 basis point Fed rate hike at September policy meeting. This, coupled with a softer tone around US Treasury yields and risk appetite in the markets, continues to drive money flows away from the safe-haven US dollar.

For its part, the CAD, a currency linked to the prices of raw materials, is being supported by a rally in crude oil prices and is putting some downward pressure on the USD/CAD pair. However, oil may not sustain its uptrend as concerns mount that a global economic downturn could affect fuel demand. This, coupled with aggressive comments from Fed officials the day before, should limit USD losses and offer support for the pair.

Although the The previous day’s break took the pair below the 100-day SMA for the first time since June, the 200-day SMA is likely to present a major headwind for the bears at 1.2743. At least a clear break and daily close below the 200 SMA would be needed to green light further losses, ideally accompanied by a fundamental development to provide additional confirmation.

Market participants are now awaiting the release of the US Producer Price Index (PPI), due later at the start of the American session today. Additionally, US bond yields and broader risk sentiment will drive demand for the dollar. Investors will also be looking to the oil price dynamics to take advantage of some short-term opportunities around the USD/CAD pair.

USD/CAD technical levels

USD/CAD

Overview
last price today 1.2764
daily change today -0.0011
daily change today -0.09
Daily opening today 1.2775
Trends
daily SMA20 1.2885
daily SMA50 1.2875
daily SMA100 1.2793
daily SMA200 1.2743
levels
Previous daily high 1.2896
Previous Daily Low 1.2751
Previous Weekly High 1.2985
Previous Weekly Low 1.2768
Previous Monthly High 1.3224
Previous Monthly Low 1.2789
Daily Fibonacci of 38.2%. 1.2806
Daily Fibonacci of 61.8% 1,284
Daily Pivot Point S1 1.2719
Daily Pivot Point S2 1.2663
Daily Pivot Point S3 1.2575
Daily Pivot Point R1 1.2863
Daily Pivot Point R2 1.2952
Daily Pivot Point R3 1.3008

Source: Fx Street

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