The Canadian Dollar pared the previous day’s decline and is the best performing currency against the greenback on Thursday, and we may see the commodity currency continue to strengthen going into the Asian trade as investors raise their appetite for risk. The USD/CAD extended the drop from the overnight session and is currently 40pips lower after moving 74% of its daily ATR, and the exchange rate may trend lower over the next 24 hours of trade as the greenback weakens against most of its major counterparts. However, as the 30-minute RSI approaches oversold territory, we may see the decline temper off ahead of the Asian session, which could lead price action to bounce back towards the 120-SMA at 1.0454. Nevertheless, as the economic docket continues to reinforce an improved outlook for the world’s eighth largest economy, a rebound in Canadian retail sales could drive the exchange rate lower as policy makers anticipate the economic recovery to strengthen throughout the first half of the year.
The British Pound tumbled lower against the U.S. dollar for the second day as the economic docket reinforced a weakening outlook for the U.K., but appears to have found intraday support ahead of the 1.5550 level as the 30-minute RSI bounces back from oversold territory. The GBP/USD is nearly 30pips lower on the day after slipping to 1.5557 during the early U.S. trade, and we may see the pair continue to retrace the overnight decline going into the Asian session as risk trends continue to dictate price action in the foreign exchange market. As a result, we may see the pound-dollar cross back above the 240-SMA at 1.5688 and maintain the narrow range carried over from the previous week as market liquidity thins ahead of the weekend. Nevertheless, as the Bank of England maintains a dovish outlook for future policy and maintains the option to expand its asset purchase program, expectations for further easing is likely to hold the GBP/USD within the downward trending channel from the November high (1.6879).
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To discuss this report contact David Song, Currency Analyst: dsong@fxcm.com
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