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The dollar weakens + the Canadian dollar wait and see, market sentiment turns to the dollar/Canadian short position
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Hello everyone, today XM Foreign Exchange will bring you "[XM Foreign Exchange Decision Analysis]: The US dollar weakens + the Canadian dollar wait and see, and market sentiment turns to the US dollar/Canadian dollar shorts". Hope it will be helpful to you! The original content is as follows:
On Thursday (August 7), the US dollar against the Canadian dollar continued to decline, and the European trading session was trading around 1.3730. The recent weak exchange rate performance is mainly due to the continued downward pressure of the US dollar index, while the market remains highly concerned about US employment data and the upcoming economic indicators in Canada.
Brands:
The recent U.S. economic data performed worse than market expectations, further exacerbating the market's bet on the Fed's early turn to easing. Last week, U.S. non-farm employment data failed to reach expected levels, strengthening the market's consensus on a rate cut in September. Some traders even bet that the Fed may cut interest rates again before the end of the year.
Many Fed officials, including Kashkali, Daly and Cook, publicly stated this week that there are signs of slowing down in the labor market and that monetary policy needs to be adjusted dynamically. This statement made the market more convinced of the Fed's tendency to be loose.
At the same time, US President Trump announced that he would appoint candidates for the Federal Reserve Chairman and Vice Chairman within this week, and the new candidates may redefine the pace of monetary policy in the xmniubi.coming months. Potential candidates include White House economic adviser Hassett and former Federal Reserve Director Wash, etc., showing Trump's strong desire to intervene in the Fed's independence, which has triggered market uneasiness in the short term.
Canada's Ivey Purchasing Managers Index (PMI) and labor market data to be released on Friday will become key variables that affect the Canadian dollar's trend. If the data continues to reflect the cooling trend of the labor market, the market will reassess the possibility of whether the Bank of Canada will resume its interest rate cut path in the future.
Technical:
Current USD to Canadian DollarThe price is in the volatile downward structure on the 240-minute K-line chart. Recently, the exchange rate has fallen from the high of 1.3878, and has now fallen below the Bollinger Band middle track (1.3777) and 1.3755 near the support line. The current upper and lower rails of the Bollinger band are 1.3843 and 1.3712 respectively, and the price is close to the Bollinger band lower rails, and there is a risk of supporting testing of the Bollinger band lower rails.
The dead cross of the MACD indicator continues to expand, the MACD bar chart has been green for many consecutive days, and the DIFF line and the DEA line are downward simultaneously, reflecting that the short momentum still dominates the trend, and no obvious divergence or reversal signal has appeared.
The RSI indicator is located in a relatively weak area of 36.05 and is on the verge of oversold in the short term, but no significant rebound momentum has been formed, indicating that the exchange rate still has room for further decline.
The stage low point 1.3721 constitutes the current short-term support. If this level is lost, it may test the Bollinger band lower track around 1.3712. On the contrary, if the exchange rate rebounds above the Bollinger middle track in the short term, it can only alleviate the short-term pressure on short-term bears.
In general, the current technical pattern shows a typical "recrew confirmation of breaking" pattern. If there is no effective technical rebound in the future market, the bear trend will continue further.
Prevention of Market Sentiment:
From the changes in market sentiment, the recent decline in the US dollar against the Canadian dollar is not caused by a "panic sell-off", but a "retracement" pattern. The market's expectations for the Fed's policy shift have been heating up, causing the US dollar index to be under continuous pressure. Currently, trading is around 98, which has dropped significantly from the previous high.
In terms of sentiment indicators, the RSI indicator shows that the market is in a mild oversold state, but has not triggered a reversal signal of extreme sentiment. This shows that the current market tends to be cautious before data confirmation and wait for more signals to guide the direction.
On the other hand, although the Canadian dollar has been dragged down by weak domestic data, the Bank of Canada has not sent out a clear policy turn signal recently, which makes the exchange rate trend more restricted by the US dollar's own performance, showing the logic of "selecting the strong from weak".
From the perspective of the options market, the put option trading volume is slightly higher than the call option, indicating that the market expects the exchange rate to continue to decline in the short term, but the volatility level remains stable, showing that the sentiment is still relatively rational and has not entered the panic range.
The above content is all about "[XM Forex Decision Analysis]: The dollar weakens + Canadian dollar wait and see, market sentiment turns to USD/Canadian dollar shorts". It is carefully xmniubi.compiled and edited by the editor of XM Forex. I hope it will be helpful to your trading! Thanks for the support!
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