“The trend is your friend.”
Over the last three months, USD/CAD experienced a parabolic climb of nearly 13% to a high of 1.4667 amid the crude oil price crash considering the Canadian economy is highly dependent on oil and energy exports. The oil commodity is trading more than 60% off its year-to-date highs during the COVID-19 outbreak and oil price war sparked by Saudi Arabia.
On Friday March 20th 2020, the Bank of Canada entered a US Dollar swap line arrangement with the US Federal Reserve to boost liquidity and curb the international USD demand. This strategy could alleviate some of the strain recently exerted on the financial system and facilitate a short-term pullback in USD/CAD price action as liquidity is restored.
Even after slashing its policy interest rate by 50-basis points on March 4th 2020 and an additional 50-basis points on March 13th2020 to 0.75%, the Bank of Canada may use its blunt tool again to deliver further rate cut at the next meeting on April 15 as stated by Governor Poloz to deploy other market weapons if required to support growth and keep inflation on target.
Therefore, the Loonie could easily exhibit the bearish behaviour.
Technical Analysis Overview:
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