The USD-strength that we have seen in the past week appears to be stalling today especially after the FOMC minutes. The USD/CAD put in a price top and threatens to continue its medium-term bearish trend after this past week’s short-term bullish correction.
The FOMC minutes did not provide much more insight than what the market was already expecting, which is a cautious move towards a rate hike. Most have written off a June-hike, and the minutes appear to confirm the delay as well.
” One participant argued for such a step in order to bring the spread up to a level closer to that prevailing prior to the financial crisis, but several participants favored maintaining the current spread at least until the process of policy normalization was well under way and policymakers had considered carefully the potential benefits and costs of such a change. In part, that view reflected concerns that an increase in the spread that coincided with the initial step in policy normalization could complicate communications regarding the Committee’s policy intentions.” (FOMC Minutes)
The loss of USD-strength is apparent in he USD/CAD:
After a rally from the month and year low at 1.1903, USD/CAD stalled under 1.2256 even before the FOMC minutes. The around the time of the release and after price fell below the 1.22 support pivot, forming a price top.
Now, we don’t see a clear bearish reaction yet as price continues to oscillate around 1.22 in the hour after the release. In order to call this a true bearish reaction, we should see price fall below 1.2150 and the rising trendline while the 1H RSI falls clearly below 40. Then, the low ont he year around 1.1905 will be back in sight.
A break below 1.2150 would also be key from the daily chart’s perspective, where we see price staying in a falling channel. There is still downside risk towards the 1.18 handle, where the 200-day SMA resides.
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