The USD/CAD chart shows the Canadian dollar strengthening against the USD to levels last seen at the end of July.
On one hand, the US dollar is weakened by expectations of an inevitable rate cut. On the other, the Canadian dollar gained strength after yesterday’s inflation data:
→ Although the initial reaction pushed USD/CAD up to 1.364,
→ Today, the market seems to have reassessed the impact, with the pair falling to yesterday’s low, indicating continued bearish dominance.
Meanwhile, technical analysis of the USD/CAD chart reveals that the pair has dropped to the 1.3600 support level, which has been a key level for bulls since May.
This decline has been quite sharp, with a drop of over 2.2% from the 6th August high. Bears managed to break the trendline (shown in yellow) and push the RSI from the overbought zone close to the oversold zone within two weeks.
Notably, before the drop, the pair broke the 1.385 support level, but it turned out to be a false breakout. The 6th August candle had a long upper shadow, suggesting many traders were caught off guard.
If the bullish breakout was a false move, could a genuine breakout of the 1.3600-1.3850 range happen to the downside?
The future direction of USD/CAD will largely depend on the market’s reaction to today’s FOMC news, scheduled for release at 21:00 GMT+3.
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