USD/CAD fell 21 pips to 1.2875 as the rebound in oil prices continued. The US dollar was mixed as high yields and good economic data competed with end-of-month flows into some beaten-down currencies.
The main feature on the USD/CAD chat is the double top at 1.3077/79. The declines in the past two days emphasize that as a key point of resistance and a potential top.
The next hurdle to cross will be the June 16 low of 1.2861, which is about a dozen pips away but has held on a handful of pushes lower today. If that gives out, the 55-day moving average clocks in at 1.2783.
The Canadian dollar is a trade on the balance between growth and inflation expectations. If growth slows, the Canadian dollar is vulnerable and that’s what got this pair to 1.30. If inflation can walk the fine line between too hot and recession, there’s a window for Canadian dollar outperformance. If not, central banks could tightening too much and the global economy — and CAD — will suffer.
Domestically, the housing market is currently slowing rapidly and that will have a major wealth effect. But prices rose about 50% during the pandemic so even a large correction may be seen a paper loss by home owners.