The Canadian dollar continued to strengthen against the greenback and is the best performing currency on Monday, and the loonie may retrace the decline from the previous week as the economic docket reinforces an improved outlook for the region. The USD/CAD is slight lower on the day after moving 69% of its daily ATR, but the lack of momentum to hold below the 10-Day SMA (1.0659) could lead the pair to maintain the upward trending channel from the January low (1.0225) as investors scale back their appetite for risk. As the economic docket remains fairly light for the next 24 hours, we may see the dollar-loonie maintain a narrow range going into the Asian session as the recent rally appears to have lost steam ahead of the 200-Day SMA at 1.0860. Nevertheless, as the Bank of Canada aims to normalize policy this year, improving economic conditions are likely to boost interest rate expectations, and speculation for a rate hike may continue to support the Canadian dollar and keep the exchange rate within a broad range over the remainder of the month.
The New Zealand dollar extended the decline from the previous week, but has bounced back from the low (0.6857) to hold above the 200-Day SMA at 0.6870 and we may see the pair maintain a narrow range going into the Asian trade as market sentiment appears to be mixed following the rebound in European equities. The NZD/USD is down nearly 15pips on the day after moving 64% of its average true range, and we may see the pair continue to retrace the overnight decline following the pull back in risk aversion, but the lack of momentum to push back above the 120-SMA at 0.6892 could drive the exchange rate sideways throughout the day. Meanwhile, the economic docket scheduled for this week is expected to reinforce an improved outlook for the isle-nation, and expectations for a rate hike by the Reserve Bank of New Zealand could push the exchange rate higher as the central bank pledges to normalize policy this year.
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.
