March Low on Radar Amid Seek for Assist

Canadian Greenback Speaking Factors

USD/CAD trades to a recent month-to-month low after failing to retrace the decline following the Financial institution of Canada (BoC) assembly, and the March low (1.2365) sits on the radar forward of the Federal Reserve rate of interest resolution because the alternate charge searches for assist.

USD/CAD Fee Forecast: March Low on Radar Amid Seek for Assist

USD/CAD carves a collection of decrease highs and lows because the BoC is on observe to taper its quantitative easing (QE) program “effective the week of April 26,” and the bearish worth sequence could persist because the Federal Open Market Committee (FOMC) is anticipated to retain the present course for financial coverage.

The FOMC seems to be in rush to modify gears as the vast majority of Fed officers see the benchmark rate of interest holding close to zero by means of 2023, and the central financial institution could proceed to endorse a wait-and-see method after updating the Abstract of Financial Projections (SEP) on the March assembly as Vice Chair Richard Clarida insists that “coverage won’t tighten solely as a result of the unemployment charge has fallen under any explicit econometric estimate of its long-run pure degree.”

In flip, extra of the identical from the FOMC could preserve USD/CAD below stress because the central financial institution stays on observe to “enhance our holdings of Treasury securities by at the very least $80 billion per thirty days and of company mortgage-backed securities by at the very least $40 billion per thirty days,” and it stays to be seen if Chairman Jerome Powell and Co. will alter the ahead steering forward of the second half of the yr because the central financial institution is slated to replace the SEP on the June assembly.

Till then, the rebound from the March low (1.2365) could find yourself being a correction within the broader pattern fairly than a shift in market habits as USD/CAD trades again under the 50-Day SMA (1.2568), however the tilt in retail sentiment appears to be like poised to persist as merchants have been net-long the pair since Could 2020.

The IG Shopper Sentiment report exhibits 69.77% of merchants are presently net-long USD/CAD, with the ratio of merchants lengthy to quick standing at 2.31 to 1.

The variety of merchants net-long is 3.61% increased than yesterday and 5.64% increased from final week, whereas the variety of merchants net-short is 38.15% increased than yesterday and 14.25% decrease from final week. The ratio has narrowed from 2.54 final week as 71.72% of merchants had been net-long USD/CAD, however the crowding habits carried over from final yr appears to be like poised to persist despite the fact that the BoC begins to reduce its QE program.

With that stated, the rebound from the March low (1.2365) could find yourself being a correction within the broader pattern fairly than a shift in market habits as the lean in retail sentiment persists, and the alternate charge could proceed to carve a collection of decrease highs and lows forward of the Fed charge resolution as searches for assist.

USD/CAD Fee Day by day Chart

Supply: Buying and selling View

• The broader outlook for USD/CAD stays tilted to the draw back because it tagged a recent yearly low (1.2365) in March, with each the 50-Day (1.2568) and 200-Day (1.2930) SMA’s nonetheless monitoring the unfavourable slope carried over from the earlier yr.
• The Relative Energy Index (RSI) highlights an analogous dynamic because the indicator persistently holds under 60, with the oscillator indicating that the bullish momentum could proceed to abate because it fails to retain the upward pattern carried over from the earlier month.
• The Fibonacci overlap round 1.2620 (50% retracement) to 1.2650 (78.6% growth) seems to be appearing as resistance as USD/CAD trades again under the 50-Day SMA( 1.2568), however want a detailed under the 1.2440 (23.6% growth) area to open up the Fibonacci overlap round 1.2360 (100% growth) to 1.2390 (38.2% growth), which traces up with the March low (1.2365).
• Next space of curiosity coming in round 1.2250 (50% retracement) to 1.2280 (50% growth) adopted by the 1.2170 (61.8% growth) area.

— Written by David Track, Forex Strategist

Observe me on Twitter at @DavidJSong