Upcoming Canadian retail sales figures for July may exacerbate the USD/CAD exchange rate’s fall from the monthly high, with a better-than-expected release reinforcing the Bank of Canada’s (BoC) view that “the Canadian economy has bounced back even more strongly in the reopening phase than we were expecting” and potentially justifying the central bank’s decision to maintain the status quo.
The BoC opted to maintain “its target for the overnight rate at the effective lower bound of 0.25%” and pledged to continue its quantitative easing (QE) program “with large-scale asset purchases of at least $5 billion per week of Government of Canada bonds” at its September meeting.
From a technical perspective, the path of least resistance for USD/CAD appears to be lower, as price failed to break back above the trend-defining 50-day moving average (1.3280) and September high (1.3259).
A daily close below the 21-DMA (1.3142) probably triggers an extended slide back to support at the 50% Fibonacci (1.3039), with a break below the psychologically pivotal 1.30 level potentially bringing the October 2018 low (1.2783) into play.
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