USDCADs Big Breakout Has Bulls Eyeing Junes Peak
US traders have returned from a long holiday weekend to the see the greenback gaining across the board (see my colleague Fawad Razaqzada’s post, “Dollar rises to resistance ahead of key US data” for more).
The first of this week’s key US economic reports just hit the wires, and it’s impossible to see it as anything other than stellar. The ISM Manufacturing PMI survey printed at 61.3, easily exceeding the 57.6 reading expected by economists; this is the highest reading for the survey since May 2004, and the 2nd-highest reading seen in the past 30 years! Traders will now turn their attention to Thursday’s Non-Manufacturing PMI report to see if the strength is reflected in the service sector of the economy, which represents a much larger swathe of US economic production.
Technical View: USD/CAD
While the greenback is rising against all its major rivals, the move is particularly pronounced against the loonie. For one, the slightly soft Markit PMI report from Canada provided an unavoidable comparison between the relative economic performance on both sides of the 49th parallel. More importantly, there has been little in the way of progress on a new NAFTA deal with negotiations entering “crunch time” a mere 63 days until the US midterm elections.
Technically speaking, USD/CAD has exploded out of its near-term bearish channel to resume its longer-term uptrend. Interestingly, the RSI indicator broke out of its own bearish channel back on Friday, foreshadowing the bullish breakout in the exchange rate itself. Looking ahead, bulls will look to target the mid-July peak near 1.3290, followed by the 14-month high around 1.3390 next. In the short term, the path of least resistance remains to the topside as long as rates hold above the key psychological level at 1.30.
Source: TradingView, FOREX.com
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