USD/CAD downside momentum hits a pause
The loonie has been on a hot run of form to start the week but after the Bank of Canada decision and Poloz's statement yesterday, things are starting to cool off. USD/CAD broke below the upwards trendline from October at the start of the week and that precipitated a further downside move which saw the pair test the 100-day MA (red line) in overnight trading.
That is the key line in the sand for a further downside extension for the time being. It's been a good run for sellers but this is where trading sentiment gets a little bit caught in the middle.
Poloz basically hinted that the central bank will be more data dependent moving forward as it assesses further rate hikes but the fact that he didn't rule them out altogether is a positive for the loonie. But what it means now is that the currency's pricing of rate hike expectations will be rather sensitive towards economic data and oil prices.
Oil slipping by 1% on the day isn't helping the currency push forward with further gains today but it doesn't mean that the bullish momentum (USD/CAD bearish) is gone either.
Traders will now have to reassess the pair at these levels as price will look to threaten the 100-day MA in an attempt to break to the downside and sellers will be defending the near-term bearish bias in that case. The 100-hour MA sits at 1.3306 and that will be the defining level in terms of whether or not the bearish run will continue.
For buyers, breaking back above the 100-hour MA will be a good platform to see a further recovery in the pair. For now though, I would expect price action to settle around these levels (between 100-day MA @ 1.3180 and 100-hour MA @ 1.3306) before the next catalyst drives a break in either direction - either from Canadian data, a significant change in oil prices, or a shift in dollar sentiment.
