USD/CAD trades into a fresh weekly high (1.2685) after retracing the decrease after the semi-annual testimony with Federal Reserve Chairman Jerome Powell, along with also the Canadian Dollar may face a larger correction during the first week of March as the rebound in the exchange rate complies with all the current weakness in global equity prices.
Swings in danger presuming may continue to sway USD/CAD since the US Dollar still reflects an inverse connection with investor confidence, but the advance in the February reduced (1.2468) can turn out to be a fatigue of this wider trend rather than an alteration in behavior like the price action seen in 2020.
It seems like the Federal Open Market Committee (FOMC) is in no hurry to alter the path for monetary policy as New York Fed President John Williams insists that"GDP growth this year could be the strongest we've seen in years," using all the permanent voting-member on the FOMC going into say that"fiscal support, combined with exceptionally favorable financial conditions and continuous advancement on vaccinations, and are reasons to be optimistic the market will likely experience a strong comeback this season."
But Williams highlights that the Fed"will continue to watch and find out and remain dedicated to using our entire selection of tools to help assure that the recovery is going to be as robust as possible," and the dovish forward advice may keep key marketplace topics set up as the FOMC remains on course to"raise our holdings of Treasury securities by at least $80 billion each month and of agency mortgage-backed securities by at least $40 billion each month."
Subsequently, the current weakness in the Canadian Dollar may prove to be a correction from the broader trend as opposed to an alteration in market behaviour as the Fed's balance sheet climbs to a new record high of $7.590 trillion in the week of February 24, but the lean in retail opinion persist as traders are net-long USD/CAD as May 2020.
The IG Client Sentiment report reveals 66.14% of traders are still net-long USD/CAD, with the proportion of traders extended to short standing at 1.95 to 1.
The number of dealers net-long is 13.72% lower than yesterday and 10.82% reduced from last week, while the amount of traders net-short is 3.09% greater than yesterday and 0.81% lower from last week. The decline in net-long position comes as USD/CAD transactions to some brand new weekly high (1.2685), although the rise in net-short curiosity has helped to alleviate the crowding behaviour as 75.24% of traders were net-long the pair earlier this week.
With that said, recent price action in USD/CAD points into a test of this 50-Day SMA (1.2724) as the exchange rate phases a rebound following a bullish external day (engulfing) candlestick creation, but the advance from the February reduced (1.2468) may prove to be an exhaustion of the wider trend as opposed to a change in behaviour such as the price action observed in 2020.
Keep in mind, USD/CAD cleared the January 2020 reduced (1.2957) following the US election, using the exchange rate trading to new annual highs in November and December as the Relative Strength Index (RSI) established a downward trend during precisely the same period.
USD/CAD started off 2021 by taking out last year's low (1.2688) although the RSI broke from their bearish creation, with insufficient momentum to hold over the 1.2770 (38.2% expansion) area pushing the exchange rate briefly below the Fibonacci stride around 1.2620 (50% retracement) to 1.2650 (78.6% expansion).
However, USD/CAD broke from the opening scope for January after the series of failed attempt to close below the 1.2620 (50 percent retracement) to 1.2650 (78.6% growth ) region, together with the RSI diverging with price as it established an upward tendency.
But the rebound in the January reduced (1.2589) turned out to be a correction in the wider trend as opposed to an alteration in USD/CAD behaviour as the foreign exchange rate traded into some brand new 2021 low (1.2468) after the series of failed efforts to climb back above the 50-Day SMA (1.2724).
Recent price activity points to a test of this 50-Day SMA (1.2725) since USD/CAD initiates a series of highs and highs after dividing a bullish external day (engulfing) candlestick formation, however need a close above the 1.2620 (50 percent retracement) to 1.2650 (78.6% growth ) zone to deliver the 1.2770 (38.2% growth ) place on the radar.
