Canadian Dollar, USD / CAD, Bank of Canada – Talking Points:
- the ASX 200 The index fell 2% during Asia-Pacific trading after Facebook threatened to ban Australians from sharing information on the platform
- The Canadian manufacturing PMI could encourage the BoC to release the throttle.
- USD / CAD rate on the verge of further decline after crossing multi-year trend support.
Australia’s ASX 200 index fell 2% during Asia-Pacific trading after Facebook threatened to ban residents from sharing information on the social media platform.
Looking ahead, the US Manufacturing PMI and German unemployment data for August highlight the economic role.
USD / CAD could extend declines ahead of Canadian manufacturing PMI
The impact of future economic data is intensified due to the suggestion by several members of the Bank of Canada that monetary policy may be at its effective limit.
Deputy Governor Carolyn Wilkins said that “central banks risk running out of conventional firepower if we see an economic slowdown in a world of low interest rates” during the central bank’s monetary policy framework review on August 26.
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This was followed by the governor Tiff Macklem’s statement that “many people do not feel that inflation is falling when food inflation averages nearly 3%” at the Federal Reserve’s symposium in Jackson Hole.
Of course, these quotes barely indicate that the BoC is considering withdrawing all forms of stimulus and considering raising interest rates, but it does indicate that Canadian policymakers are increasingly sensitive to the impact. potential for further monetary policy measures.
With that in mind, positive economic data could encourage the central bank to start rolling back some of its existing policy measures, which could serve to bolster the Canadian dollar against its major counterparts.
USD / CAD Weekly Chart – Breaking Worrying 8 Year Uptrend For USD Bulls
USD / CAD weekly chart created using TradingView
From a technical standpoint, the USD / CAD looks set to extend its fall from the annual high after plunging through 8-year trend support, as the RSI plunges to its lowest level since at the end of 2017 and that the MACD indicators slide into negative territory.
With price now following below the 200 week moving average that defines sentiment (1.3123), selling pressure may intensify in the short term as USD / CAD moves towards support at December low 2019 (1.2952).
A weekly close below the psychologically pivotal level of 1.29 would likely coincide with oversold readings from the RSI and could chart a path for price to test October 2018 low (1.2783).
USD / CAD Daily Chart – Further Losses Coming As RSI Falls Oversold
USD / CAD daily chart created using TradingView
Zooming in on a daily chart reinforces the bearish outlook seen over longer time frames as prices collapse on 50% Fibonacci support (1.3039) and the RSI plunges into oversold territory.
As the USD / CAD remains encapsulated by a descending Schiff’s range and continues to track below the 21, 50 and 200 day moving averages, the path of least resistance appears to be lower.
With that in mind, price may continue to pull back to confluent support at the December 2019 low (1.2952) and midline of the fork if the sellers manage to overcome the psychological support at the 1.30 level.
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– Written by Daniel Moss, Analyst for DailyFX
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