USD/CAD bulls licking their wounds at near to session lows after Trump-dump

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  • Recent support has been observed around 1.3050 and recent USD/CAD gains have faltered above 1.3150.
  • Domestic rate expectations are firming and yield spreads are narrowing in a CAD supportive manner

USD/CAD has dropped from the session’s low and subsequent bounce to 1.3092, but only so far as 1.3054 and has not, so far, matched the session lows. Currently, USD/CAD trades at 1.3061 and has consolidated here while markets take a breather from prior FX volatility.

The volatility arrived when Trump, once again, voiced his opinion on the value of the US dollar. According to Bloomberg, at a fundraiser at the Hamptons on Friday, President Trump complained to wealthy Republicans about the Fed chairman Powell’s monetary policy decisions and said that he expected Jerome Powell to be “a cheap-money Fed chairman.” The dollar dumped from 96.1300 to 95.9320 within the 95.9320-96.4020 range on the headlines. 

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However, prior to the move, the Loonie had actually been on the back foot although Friday’s stronger than expected CPI data and its implications for the BoC are also in mind.

“Domestic rate expectations are firming and yield spreads are narrowing in a CAD supportive manner. Sentiment appears to be delivering additional CAD support as we note the softening in measures of implied volatility and stabilization in risk reversals. USD/CAD is currently well above our FV estimate of 1.2922,” analysts at Scotiabank explained. 

USD/CAD levels

“USD/CAD short-term technicals: neutral—momentum indicators are neutral and trend strength indicators are weak. Recent support has been observed around 1.3050 and recent USD/CAD gains have faltered above 1.3150. We would anticipate additional near-term support at 1.3020, 1.3000 and the 100 day MA (1.2979),” the analysts at Scotiabank argued. 

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