Canadian Dollar Remains Resilient, Japanese Yen Breaks Out
Looking beyond the strength in the greenback, the Canadian dollar remains resilient against its U.S. counterpart and is the best performing amongst the majors on Wednesday. The USD/CAD is currently 85pips higher from the open after moving 114% of its daily ATR, and the exchange rate may continue to push higher going into the Asian trade as the pair rebounds from the yearly low at 1.0062. However, the lack of momentum to hold above the 20-Day SMA at 1.0269 could lead the dollar-loonie to close the gap from the 120-SMA at 1.0185 before we see another break to the upside. Nevertheless, as the Bank of Canada holds an improved outlook for the region, expectations for a rate hike later this year could drive the exchange rate towards parity over the coming months as the Federal Reserve maintains its pledge to hold the benchmark interest rate the record-low for an extended period of time.
The Japanese Yen took the biggest tumble against the greenback, with the exchange rate crossing above the 200-Day SMA (91.56) to reach a high of 91.96. The USD/JPY remains 150pips higher on the day after moving nearly 193% of its average true range, but the advance appears to be finding psychological resistance ahead of the 92.00 as the 30-minute RSI falls back from a high of 91. As a result, the exchange rate could fall back going into Thursday’s session and test the 200-Day SMA for short-term support as it breaks out of the downward trend from the 2007 high (124.13). As a result, we may see a phase of consolidation paired with choppy price action heading into the following month as investors appear to be unwinding their positions funded by the low-yielding greenback, but the U.S. dollar is likely to face increased volatility going into the second-half of the year as investors weigh the prospects for future policy.
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To discuss this report contact David Song, Currency Analyst: email@example.com
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