The USDCAD is trading to new session highs and in the process is running further away from its 100 day moving average (currently at 1.26735).
Recall from Friday, the price moved above – and closed above – that moving average for the first time since March 15. Initially the price traded above and below the moving average level, but ran higher as dollar buying pushed the pair higher into the close.
Looking at the daily chart, there is a swing area between 1.2785 and 1.28132 above which is the next target area. Admittedly, there has also been a number of moves above that area going back to August 2021. However momentum has faded on those breaks, and the price has rotated back lower and often times to the lower swing areas.
Drilling down to the 5-minute chart below, the pair moved below its 100 bar MA AND 200 bar MA earlier in the London morning session (see blue and green lines in the chart below). That break should have led to more selling momentum, after all it was the first time the pair had traded below both moving averages since April 21.
However, of note is momentum did not increase. In fact, the price moved back above the 200 bar MA (green line) on the very next bar after the break, and started to reestablish support against the 200 bar moving average level (green line).
After moving back above the higher 100 bar MA (blue line), the sellers gave up and buyers pushed the price higher.
Admittedly, the price has retested the rising 100 bar moving average on a few other dips on its way to the new session highs today. However, buyers continued to buy against that moving average.
The 100 bar moving average currently comes in at 1.27489. The current price is trading at 1.2768. It would take a move back below the 100 bar moving average and the lower 200 bar moving average at 1.27395 (and staying below), to give the sellers more comfort.
Absent that (or on a failed break like seen in the London morning session) and the buyers remain in control.
BOC Macklem is commenting now that Canada needs higher interest rates as demand is beginning to run ahead of the economy’s productive capacity. Will his comments strengthen the loonie (lower USDCAD)?
Watch the 100 and 200 bar MAs for technical clues.