Should we buy the Loonie?
USD/CAD has been in a downtrend in the last several days, or in a freefall, as Eric referred to it. But it looks like this downtrend has reached an end unless fundamentals enter the play and ruin all technical indicators. Some forex analysts are calling to buy this forex pair below 1.30. Their reason for this is fundamental, but we have added a technical reason as well.
Fundamentally – The Canadian GDP declined by 1.6% in Q2, with wildfires contributing to this. The economic data hasn´t been that good either and some sectors of the Canadian economy are in recession. So, although the BOC (Bank of Canada) didn´t cut the interest rates today, it´s very likely that they will do so in October. Besides that, there are dovish remarks on the BOC statement. This should keep the CAD under pressure until the October meeting.
The 200 smooth moving average and the trendline are teaming up together in providing support
Technically – On the daily forex chart, the price is just above the ascending trendline and the 200 smooth moving average (SMA) and the stochastic indicator is already oversold. On the weekly forex chart, the 100 simple moving average is providing support right now and from what we can see from that chart, this moving average has been like an iron gate so far this year.
The 100 moving average is also a strong support line on the weekly chart
Update: Just as I was writing this update the price jumped about 80 pips. It still is a good time to open a long term buy forex signal, but I would prefer to see this move fade and give us a better opportunity to buy lower.
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