The USD/CAD has reversed from early morning lows, and support for the moment appears rather solid and traders have important choices to make.
The USD/CAD remains within the lower realms of its range taking into consideration a one month chart. However, this morning’s early trading broke highs seen yesterday and Friday. The USD/CAD currency pair is around 1.28700 as of this writing and is challenging values seen on Thursday of last week. When the Bank of Canada increased its interest rate on the 14th of July the USD/CAD was trading near 1.32200 momentarily, after the hike a low of nearly 1.28300 was seen on the 23rd.
U.S Interest Rate Hike was Anticipated and the USD/CAD Remains Turbulent
The lows seen on the 23rd of July were penetrated on the 28th of July when the U.S Fed hiked their interest rate, and yesterday the USD/CAD hit a monthly low of nearly 1.27675. The last time this value had been seen was on the 10th of June. The move higher in the USD/CAD since hitting yesterday’s low needs to be looked at by traders and may prove suspicious in some eyes.
- The Bank of Canada has made it clear they intend on being hawkish and the early September monetary meeting is likely to produce another hike higher.
- Matching the U.S Fed’s moves seems to be the intent of the Bank of Canada to protect the Canadian dollar.
- Commodity prices in the energy sector and grains factor into the behavioral sentiment for USD/CAD trading.
Resistance levels should be watched closely in the short term. If the 1.28750 level begins to look durable it may set off another round of selling for the USD/CAD and begin to challenge support levels again. The move higher after yesterday’s low was seen, was likely a reaction to dropping below the 1.28000 level for the first time in a sustained manner since the second week of June.
Risk Management is Necessary as these Lower Realms of the USD/CAD get Tested
Having tested lows not seen in a month and half yesterday, the reversal higher can be viewed as a natural reaction. Traders need to be careful and should use their risk taking tactics in a thought out manner, but if current resistance levels prove strong, selling the USD/CAD and looking for the 1.28600 mark to be challenged again the in the short term may be a solid wager.
If the USD/CAD moves below 1.28600 and the 1.28500 then becomes vulnerable, lower depths could come into view which were seen yesterday. The USD/CAD does have the potential to produce volatile results, but looking for additional downside price action in the short term may be the right wager.
Canadian Dollar Short-Term Outlook
Current Resistance: 1.28775
Current Support: 1.28575
High Target: 1.28970
Low Target: 1.28212
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