Canadian Dollar Extends Rally, Euro Remains Under Pressure
The Canadian dollar extended the rally from earlier this week, with the USD/CAD slipping to a low of 1.0351, but the short-term decline appears to be tapering off as it fails to retrace the rally from the monthly low (1.0275). The dollar-loonie is 50pips lower from the open after moving 73% of its daily ATR and there’s certainly scope for the exchange rate to push lower during the American trade, but the rise in risk appetite appears to be tapering off as the U.S. equities market pares the small advance from the open. As a result, we could see a corrective retracement as the 30-minute RSI bounces back from oversold territory, which could push the exchange rate back towards the 240-SMA at 1.0447. At the same time, if we see a reversal, with the dollar-loonie crossing back above 1.0450, the pair is likely to close the gap120-SMA at 1.0492.
The Euro weakened against the greenback for the second day and remains the worst performing currency amongst the majors on Wednesday, and the single-currency appears to have carved a near-term top as price action fails to hold above the 100-Day SMA at 1.2892. The EUR/USD is 60+pips lower on the day after moving 82% of its average true range, and the exchange rate may continue to trend lower going into the Asian trade as the 120-SMA (1.2915) looks poised to cross below the 240-SMA at 1.2884. However, as the 30-minute RSI rebounds from oversold territory, a corrective retracement could play out later today, which could lead the euro-dollar to fill-in the gap from the 240-SMA, but the drop in risk appetite could drive the exchange rate lower going into the Asian trade as risk sentiment remains a leading driver of price action for the currency market.
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