Crude aside, traders have also factored in the fact that the potential for a rate cut from the Bank of Canada had dropped from 60 to 32 percent. Nevertheless, on a macro-standpoint, the slowdown in both the US and Canadian economies will strengthen; and traders could ditch the loonie for the save-haven greenback.
The recent strength in the CAD does allow a more balance, two-way market. We are likely to see the USDCAD continue trending lower until risk appetite wanes.
Price action has broken the upward trend that has lasted since May 2015. Support at 1.34 will likely be challenged prior to testing the 200-day . The 20-day has bearishly crossed the 50- and about to cross the 72-day .
The only problem I see with the current down move is: is increasingly dropping off and the pair is no longer overbought on longer time frames. This could cause traders to re-enter longs if the risk environment wanes causing a move back to 1.3770.
Sentiment around crude and equities will remain important.
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