FOREX: DXY Consolidating Recent Weakness, USDCAD Extends Bearish Theme
Dec-12 10:29
- Having held resistance well across November, the USD Index’s pull lower has gathered downside momentum this week, assisted by a not so hawkish cut from the Fed and the associated constructive risk backdrop. This prompted the DXY to extend its three-week pullback to ~2.25% yesterday, with the DXY currently consolidating a 0.6% decline this week.
- CAD is an outperformer on Friday, extending the recent bull theme as the global FI hawkish repricing was particularly substantial for Canada. Expectations for BoC hikes through next year stand firm by now following stronger labour market data and a hawkish BoC meeting this week.
- This keeps the bear theme in USDCAD firmly intact as spot narrows the gap to 1.3727, the September 17 low. Short-term gains would be considered corrective and would allow an oversold condition to unwind, with initial firm resistance to watch is 1.3936, the 20-day EMA.
- Following yesterday's SNB decision, CHF this morning holds most gains seen over the past couple of sessions against a wide set of G10. USDCHF remains a key detriment of dollar weakness post FOMC. The pair narrowed in on clustered horizontal support into the 0.7829-78 area - marking the series of lows printed across Q3/Q4 this year.
- GBP has seen moderate pressure following the below-expectation October GDP figures. This led EURGBP to a 0.8775 overnight high, with recent gains signalling a possible reversal and the end of the corrective phase. Initial firm resistance to watch is unchanged at 0.8802, the Dec 2 high, while key short-term support has been defined at 0.8721, the Dec 9 low.
- The data calendar remains light for the rest of the day, with only Canada housing data being scheduled. Fedspeak is set to pick up, with Paulson, Hammack and Goolsbee appearing today. Goolsbee may be of particular focus as he was a hawkish dissenter in the FOMC earlier this week.
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FOREX: Jobs Boost Still Providing CAD Support
Nov-12 10:18
- Despite the recovery for the greenback overnight which has prompted a ~30pip move higher for the USD index, USDCAD has largely shrugged off the move, actually trading lower on the session and consolidating close to recent lows around the 1.40 mark.
- As a reminder, USDCAD came under firm pressure last Friday following the above-consensus employment data. The pair notably fell back below the prior breakout level at 1.4080, and the subsequent extension lower has seen USDCAD move further away from strong touted resistance, the top of a bull channel, drawn from the July 23 low.
- Having highlighted this area as a key obstacle to further USDCAD strength, price has subsequently failed there on two occasions, bolstering the potential of a short-term bearish signal. Indeed, this week’s consolidation just above 1.40 highlights this bearish threat.
- The immediate focus will be on the 50-day EMA, which we have not closed below since September. The average intersects at 1.3957. Below here, key support is at 1.3888, the Oct 29 low, a level that would coincide with the bottom of said bull channel.
- Canada Oct CPI data is due next Monday, the final inflation data before the Dec 10 BOC meeting. Importantly, the jobs data showed gains even in areas thought to be hit hardest by U.S. tariffs, suggesting the central bank will be more comfortable with its view interest rates are low enough to support the economy and keep inflation on target.
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