MAs Keep the Pressure to the Downside for USD/CAD
USD/CAD tried to retrace higher yesterday, but the bullish momentum faded below the 50 SMA as sellers still remain in control
USD/CAD was trading in a range since October, with the range getting closer, although we saw a break to the downside at the end of last month, after buyers failed to push the price above the resistance around 1.3650. The price made a quick reversal below the resistance zone and has been falling pretty fast, losing around 5 cents until late last week.
Last week, the Federal Reserve (FED) decided to finally pause with rate hikes, keeping interest rates at 5.00-5.25%. The FED’s monetary policy committee, known as the Federal Open Market Committee (FOMC), wants to gather more economic data before making a decision on another rate hike. They are attempting to fine-tune their policy to reach an adequately restrictive level that would bring down inflation without causing significant economic hardship.
In contrast, the Bank of Canada (BOC) surprised the market by delivering a 25 basis points rate hike earlier this month. The BOC expressed dissatisfaction with the pace that the inflation rate was falling in the first quarter of 2023 and deemed it appropriate to increase the interest rate.
On the daily chart of this pair, we can observe that the price briefly broke below the 200 daily SMA at the beginning of this month, which was acting as support and then pushed below the support zone above 1.33 last week. On the H4 chart above, we see that the 20 SMA (gray) has been acting as resistance, pushing the price down, showing that the pace of the decline has been quite strong. When the 20 SMA was broken on two occasions, the 50 SMA (yellow) came into play, stopping the retrace higher.
So, the pressure remains to the downside for USD/CAD and the retrace higher yesterday stopped below the 50 SMA once again at around 1.3270. For sellers looking for an opportunity to re-enter the market, a significant resistance level to consider would be around 1.33.
USD/CAD Live Chart
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