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USD/CAD hits fresh daily lows under 1.3200

  • US Dollar retreats across the board, DXY turns negative for the day.  
  • Key data ahead: Canadian inflation and US retail sales on Wednesday.

The USD/CAD pair broke below 1.3220 and fell to 1.3195, hitting a fresh daily low. It then bounced toward the 1.3210 area and as of writing trades around 1.3200, down 35 pips for the day.  

Risk-on boosts commodity currencies  

Brexit hopes triggered a rally in Wall Street and also a decline of the US dollar versus majors. Although the Japanese Yen was the most affected by the positive tone across markets. Also, the Swiss Franc and Gold (safe-havens) lost ground during the American session.  

The critical driver of today’s price action has been the negotiations between the United Kingdom and the European Union. The latest headlines pointed toward a potential agreement relatively soon and boosted the Pound and risk appetite. The Greenback turned negative, with the DXY falling from above 98.60 to 98.20.  

After today’s light economic calendar, crucial data is due on Wednesday. In the US, retail sales numbers for September (one of the last critical reports before the next FOMC meeting) and in Canada, inflation data.  

“After another hot employment number in Canada (yes there is a lot of noise in the data), we head in to CPI with a 2.0% YoY number expected, up 0.1% relative to August. As the MoM is expected to be -0.3%, the opposite direction of YoY, we would expect the market reaction to be muted,” wrote TD Securities analysts. They also warned that a big downside surprise would suggest excess slack in the economy which would be counter to what the recent strong job numbers are suggesting.  

Technical outlook  

The short-term outlook points to the downside in USD/CAD, particularly if it holds under 1.3200. The next support might be seen at 1.3190, followed by last week’s low at 1.3170. On the upside, now 1.3220 is the immediate resistance, and then comes the 1.3235/40 barrier that if broken, should lead to further appreciation targeting 1.3260.


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