Technical Analysis of USD/CAD
There was strong interest in the Canadian Dollar throughout 2012 as currency traders increased their appetite for risk, with the USD/CAD trading downwards since mid-December. From a fundamental point of view, we could see the picture changing with the Bank of Canada interest rate announcement on Thursday. Economic activity slowed during the last three months of 2011, which could make the BoC curb its fundamental assessment. Although the benchmark interest rate is widely expected remain at 1.00%, the central bank may keep the door open to expand monetary policy. The pair is currently hovering around key support level at the 0.9900 area with with some early signs of positive RSI divergence on the daily chart.
On the hourly chart the bulls have already taken the control since the beginning of the month with the bullish bias further supported by the 20 EMA cross over the 50 EMA. The recent rally of the US Dollar index above 79.00 favours long positions with target at the 1.0049 resistance level. In the alternative scenario, a drop below 0.986 could open the door for further downside movement towards 0.9431.
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