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    USDCAD Fading – Break Below 1.2350 Could be Key

    Markets are picking up a tick from yesterday’s malaise, specifically when it comes to the Australian dollar, which is rising in the wake of today’s RBA minutes (see my colleague Chris Tedder’s note, “The RBA Needs a Lower Exchange Rate” for more). Another commodity dollar that’s seemingly taking the upper hand against the greenback is the Canadian dollar: USDCAD is pulling back today despite a lack of movement in Canada’s most important export, oil.

    From a technical perspective, USDCAD has clearly lost all of its bullish momentum from last month. The pair hasn’t set a new high in over two weeks, and actually put in a lower high near 1.2700 last week. Meanwhile, if rates drop below the monthly low at 1.2345, USDCAD would actually enter the textbook definition of a short-term downtrend (lower highs and lower lows). The secondary indicators confirm that the buying pressure has evaporated over the last few weeks: The MACD has rolled over from its elevated level and is now accelerating back toward the “0” level, while the RSI has also turned lower after a clear bearish divergence at the late January highs.

    From here, the technical picture is relatively clear. If USDCAD drops through support at 1.2350 (perhaps propelled by a breakout in oil prices), there is little in the way of previous support until the 50-day MA near the 1.2000 level. Even if bulls manage to defend support at 1.2350 in the near term, the upside momentum seems to have evaporated, so a neutral bias would be appropriate in that case.

    Key Economic Data / News that May Impact USDCAD this Week (all times GMT):

    • Today: US NAHB Housing Market Index (15:00)
    • Wednesday: Canadian Wholesale Sales (13:30), US Building Permits and Housing Starts (13:30), US PPI (13:30), US Industrial Production and Capacity Utilization (15:00), FOMC Meeting Minutes (19:00)
    • Thursday: US Initial Unemployment Claims (13:30), US Philly Fed Manufacturing Index (15:00), US Crude Oil Inventories (16:00)
    • Friday: Canadian Retail Sales (13:30), US Markit Flash Manufacturing PMI (14:45)



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