Canadian Dollar Strength Persists, British Pound Pares Advance
The Canadian strengthened against the greenback for the fourth consecutive session and is the best performing currency amongst the majors on Wednesday as investors raise their appetite for risk. The USD/JPY remains 50+pips lower from the open after moving only 54% of its average true range, and the exchange rate may continue to push lower going into the Asian trade the daily RSI continues to pull back from overbought territory. However, as price action fails to hold below the 50-Day SMA 1.0150, with the 20-Day SMA (1.0146) crossing above the 50-Day, the dollar-loonie may sustain the rebound from the yearly low (0.9929). However, as the Bank of Canada raises its outlook for the economy and drops its dovish for future policy, the Canadian dollar may continue to outperform over the near-term as investors see scope for a rate hike later this year.
The British Pound pared the overnight advance and slipped to a low of 1.4836 during the North American trade as the Bank of England maintained a cautious outlook for the U.K. economy, and fears of a protracted recovery may weigh on the exchange rate over the near-term as the central bank holds a dovish bias for future policy. The GBP/USD is 100pips lower on the day after moving 103% of its ATR, and the pair may continue to hold steady going into the Asian trade as it maintains the narrow range from earlier this week. However, as the daily RSI bounces back from a low of 29, the short-term rally from the yearly low (1.4836) could carry into the remainder of the week as the uncertainties surrounding the outlook for fiscal policy dissipates.
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