The Canadian dollar strengthened against the greenback for the third day, with the exchange rate slipping below the 50-Day SMA (1.0569) during the European trade to reach a low of 1.0553 on Tuesday, and the currency may continue to hold a broad range going into the Asian session as investors weigh the outlook for future policy. The USD/CAD remains 50pips lower on the day after moving nearly 63% of its daily ATR however, the lack of momentum to hold below the 50-Day SMA could lead the pair to retrace the overnight decline and fill-in the gap from the 240-SMA at 1.0643 as the 30-minute RSI bounces back from the lows. Nevertheless, the economic docket is expected to show economic activity expanding 0.3% in October after increasing 0.4% in the previous month, and the rise in the growth rate may keep the Canadian dollar bid throughout the remainder of the week as the economic outlook improves.
The Japanese yen weakened for the sixth-day, with the USD/JPY rising to a two-month high of 91.88, and the pair looks poised to test the October high at 92.34 as investors look to unwind their dollar-backed trades going into the following year. The dollar-yen remains higher on the day after moving approximately 50% of its average true range however, the intraday rally looks to be overdone as the 30-minute RSI falls back from a high of 72. As a result, we may see the USD/JPY trend lower going into the Asian trade and cover the gap from the 100-SMA at 90.86, but the broadly based strength in the U.S. dollar is likely to keep the pair above the 100-Day SMA at 90.99. As the reserve currency begins to lose its strong correlation with risk, we may see pair continue to retrace the decline from earlier this year, which could push the exchange rate towards 93.00-10, the 50% Fib retracement of the yearly high to the yearly low.
Join us to discuss the outlook for the major currencies on the DailyFX Forums
To discuss this report contact David Song, Currency Analyst: dsong@fxcm.com
DailyFX provides forex news on the economic reports and political events that influence the currency market.
Learn currency trading with a free practice account and charts from FXCM.
