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USDCAD, Marrket Update

6/23/2022 1:35 PM

Current trend

This week, the USD/CAD pair showed ambiguous dynamics: at first, the quotes fell to the 1.2905 area, but they are currently trying to regain lost positions.

The Canadian currency came under pressure amid the release of May data on inflation in the country. The consumer price index climbed from 0.6% to 1.4% MoM and from 6.8% to 7.7% YoY, in both cases well above forecasts, with entertainment services and gasoline rising the most. The increase in inflation has called into question the effectiveness of the actions of the Bank of Canada, which has already raised the interest rate three times this year, bringing it to 1.50%. Moreover, a sharp tightening of monetary policy harms the Canadian economy. First, it continues to pressure the population's purchasing power, which is already the most indebted among the G7 countries, and increases the risk of a recession in the Canadian economy.

Against this background, the US dollar looks more attractive for investment, although the threat of a recession also exists in the US economy. Speaking before Congress, the head of the US Federal Reserve, Jerome Powell, admitted the possibility of a recession in the national economy due to a cycle of interest rate adjustments but noted that the regulator does not count on this due to the continued strong labor market. The official also said that further tightening monetary policy is appropriate, specifying that the rate hikes will depend on specific economic conditions.

Support and resistance

The price rose above 1.2939 (Murrey [6/8]), which gives the prospect of further growth to 1.3061 (Murrey [7/8]), 1.3183 (Murrey [8/8]). The key "bearish" level is 1.2770 (the middle line of Bollinger bands), a breakdown of which will allow the quotes to fall to 1.2573 (Murrey [3/8]), 1.2451 (Murrey [2/8]). The indicators do not give a single signal: Bollinger bands reverse upwards, and the MACD histogram grows in the positive zone, confirming the continuation of the upward trend, while Stochastic is pointing downwards, which does not exclude a corrective decline.

Resistance levels: 1.2939, 1.3061, 1.3183.

Support levels: 1.2770, 1.2573, 1.2451.

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