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USDCAD Market Update

8/22/2022 12:37 PM

During the Asian session, the USD/CAD pair shows ambiguous trading dynamics, consolidating near the strong resistance level of 1.3000 and local highs from July 18.

The US dollar is again actively in demand among investors as the unstable situation in world markets pushes them to new options for preserving their capital. Despite the positive macroeconomic data on inflation, which retreated from record highs in July, the US Federal Reserve is still set for further sharp tightening of monetary policy. The "hawkish" rhetoric is also followed by the Bank of Canada, which decided to raise rates by 100 basis points last month for the first time since 1998. The regulator also stressed that it would continue to develop the quantitative tightening program but expects high inflation (about 8%) to continue for several months, refuting the possibility of a recession in the Canadian economy. At the end of 2022, the gross domestic product (GDP) is expected to increase by about 3.5%, while in 2023, its growth may slow down to 1.75%.

Friday's macroeconomic data released in Canada provided little support to the national currency. Thus, retail sales in July added only 1.1%, slowed from 2.3% in May, while analysts' forecasts suggested a decline to 0.3%. Retail sales excluding auto sales for the same period corrected from 1.9% to 0.8%, which was close to market forecasts.

On the daily chart, Bollinger bands are growing moderately: the price range is expanding but not as fast as the "bullish" sentiment develops. MACD is growing, keeping a strong buy signal (the histogram is above the signal line). Stochastic, having approached its highs, reversed into a horizontal plane, indicating that the US dollar may become overbought in the ultra-short term.

Resistance levels: 1.3000, 1.3050, 1.3100, 1.3150. | Support levels: 1.2950, ​​1.2900, 1.2850, 1.2800.

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