- USD / CAD is trading without a clear direction, supported in risk averse weather.
- Ahead: US jobless claims data and Powell speech.
The USD / CAD is moving without a clear direction on Thursday, and it does so around 1.2640. In the Asian session the cross peaked at 1.2675 and then fell back to find support above 1.2630. The stability in the last hours in the bags offered resistance in the pair.
Wall Street futures point to a slightly lower open. These have remained relatively stable in recent hours, contributing to several crossings of the currency market moving in ranges, such as USD / CAD.
The climate of caution in equity markets puts a factor of vulnerability to loonie. At the same time, Treasury yields continue to play in favor of the dollar. This implies that if there is a correction in the bond market and a rebound in the stock markets, the USD / CAD could weaken, while the opposite would favor a return to 1.2700.
The report on unemployment benefits in the US will be published shortly and then the chairman of the Federal Reserve will speak. What you say about the bond market can have a big impact.
From a technical perspective, the intraday decline managed to find decent support near a resistance break point of the four-day-old downtrend line. The aforementioned resistance turned into support constituted the formation of a bullish descending wedge on the short-term charts. As the USD / CAD has so far managed to find acceptance above the resistance pattern, the intraday bias appears to be skewed in favor of bullish traders. Therefore, a move back towards the weekly highs, around the 1.2700 mark, seems like a possibility.
Meanwhile, the technical indicators on the day chart have recovered from negative territory and have maintained their bullish bias on the hourly charts. This, in turn, further supports the prospects for an extension of the recent positive rebound from multi-year lows.
Aa fSustained force beyond 1.2700 will reaffirm the constructive outlook and push USD / CAD towards the 1.2745 supply zone. Some subsequent buying should pave the way for a move towards the 1.2800 recovery.
On the other hand, the 1.2630 region could continue to protect the immediate downside. This is followed by the lower bound of the wedge, around the 1.2600-1.2590 region, which if decisively broken will negate any short-term bullish bias. The USD / CAD could become vulnerable and further accelerate the slide to challenge the key psychological zone of 1.2500.
USD / CAD 1 hour chart