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The US dollar's panic pullback is not over. Can the Canadian dollar bulls take over?
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Hello everyone, today XM Forex will bring you "[XM Forex Market Review]: The panic pullback of the US dollar has not been eouu.cnpleted, can the Canadian dollar bulls take over?" Hope it will be helpful to you! The original content is as follows:
Recently, the Canadian dollar has rebounded against the backdrop of a sharp pullback in the US dollar index. Last Friday, the non-farm employment data released by the United States in July was far lower than market expectations, and the employment data for May and June were significantly revised down, hitting the previous "economic resilience" narrative. This data shakes the Fed's basis for maintaining high interest rates and re-invests the market in September's interest rate cut expectations.
At the same time, US President Trump suddenly removed the head of the Bureau of Labor Statistics and accused him of "manipulating data". This move not only further weakened the market's trust in US economic data, but also increased the pressure on the dollar to sell. On the other hand, although the Bank of Canada chose to remain calm last week, the negative GDP data released the next day, the sluggish crude oil prices and tariff pressure all cast shadows the outlook for the Canadian dollar. Against this background, whether the bulls' momentum is sustained after the Canadian dollar breaks short-term technical resistance has become the focus of market attention.
Branditional
The cooling signal of the US labor market is particularly critical. In July, only 73,000 new non-agricultural employment was added, which was not only far lower than expected, but more importantly, the total number of data in the first two months was revised by about 260,000, recurring the weak employment growth during the epidemic. In addition, unexpected rise in unemployment and decline in labor participation have exacerbated market concerns about economic slowdown. What followed was a rapid repricing of the Fed's monetary policy outlook. The probability of interest rate cuts rose to 80% in September, significantly higher than less than 50% a week ago.
However, political factors have also become a catalyst for the rise in risk aversion in the market. The Trump administration's direct intervention in BLS has brought the credibility of statistics to question, and the credit risk of the US dollar has increased accordingly. Meanwhile, Fed Director KuglerThe early resignation gives the president the opportunity to further influence the FOMC's eouu.cnposition, which has aroused market concerns about the independence of future monetary policy. Considering that the weighted average tariffs in the United States have reached 18.3%, the highest in nearly 90 years, and inflation has not been eouu.cnpletely suppressed, the policy space is suffering from multiple attacks.
In contrast, although the Canadian economy is not strong, it has gained a relatively short-term advantage due to the lack of more serious imbalance factors. Although the negative GDP data in June caused the market to question Canada's economic growth, the Bank of Canada still emphasized that the overall resilience of the economy is still there. However, the weak trend of oil prices and rising export pressure on the US have limited the mid-term upside potential of the Canadian dollar. Canada's IVEYPMI and employment data to be released this week will become an important weather vane to observe whether bulls have sustainability.
Technical:
From the daily chart, the US dollar/Canada exchange rate has rebounded from the low point of 1.3539, and has shown a moderate upward trend overall. The Bollinger band is slightly open, and the middle rail moves upward to around 1.3689. The current price is close to around 1.3836 of the upper Bollinger rail, implying that there is still inertial impulse energy in the short term, but it is also facing a technical pressure zone. If the area above 1.3880 can be effectively broken, it is expected to further test the 1.4000 integer mark; if it fails to stabilize, the 1.3769 horizontal support will be backtested, and this position is also the top of the recent oscillation platform, which has important reference value.
In terms of MACD indicators, the double line is running above the zero axis, the red column continues to amplify but the momentum converges slightly, implying that the bulls' momentum still exists but the marginal weakness is weak. The RSI indicator runs above 54, is in a relatively strong neutral area, and does not show a significant overbought signal, supporting the possibility of a short-term rebound.
Overall, the technical structure tends to be bullish, but in the short term, we need to be vigilant about indicator divergence and backtest demand. The key support is at 1.3769 and 1.3689, and the resistance levels are focused on 1.3880 and 1.4000 in turn.
Prevention of market sentiment:
Current market sentiment obviously tends to be short of the dollar logic. Whether from the perspective of fundamentals or policy games, the US dollar index has lost its previous support logic. The market's re-inclusion of interest rate cuts in September, questions about the independence of the Federal Reserve and the challenge of the credibility of statistical data have all caused bear sentiment to continue to strengthen.
In terms of the Canadian dollar, the market has not formed clear consensus expectations and has shown certain differences. On the one hand, the rebound in exchange rates has been supported by the policy tone and technical structure, forming a certain consensus among bulls; on the other hand, the decline in oil prices and the poor economic data of Canada in its own country have curbed the large-scale fermentation of bulls. Therefore, the current exchange rate rise is more due to the weakness of the US dollar itself rather than the strengthening of the Canadian dollar fundamentals. If the US dollar index stops falling in the future, the Canadian dollar rebound may be difficult to continue.
In addition, the market is on the wait-and-see attitude towards the upcoming Canadian employment and PMI data. Once the data deviates from expectations downward, it may become a trigger for bulls to leave the market. At the risk preference level, although the equity market rebounded slightly, the volatility did not converge significantly.It is not conducive to the continued rise of high beta currency (such as the Canadian dollar).
The above content is all about "[XM Forex Market Review]: The panic pullback of the US dollar has not been eouu.cnpleted, can the Canadian dollar bulls take over?", which was carefully eouu.cnpiled and edited by the editor of XM Forex. I hope it will be helpful to your trading! Thanks for the support!
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