According to Société Generale market analysts, USD/CAD has recently broken the trend line drawn since February, resulting in an extended pullback. The currency pair has fallen below the 200-DMA, indicating a lack of steady upward momentum.
Potential Short-Term Rebound
For a potential short-term rebound, USD/CAD needs to overcome the MA near 1.3590/1.3620. If it fails to do so, there is a risk of further decline towards the next support levels near the March low of 1.3420 and 1.3350, which is the 76.4% retracement from December.
The Bank of Canada is expected to announce its third successive quarter-point rate cut today. After briefly surpassing 1.3900 in early August, USD/CAD has dropped back below 1.3550. A hawkish cut from the Bank of Canada could lead to short covering and potentially push the Loonie below 1.35, depending on the recovery of risk sentiment.
Analysis and Impact
For investors and traders, the recent break in the trend line for USD/CAD indicates a shift in market dynamics. The potential for a short-term rebound suggests opportunities for those looking to capitalize on market movements. However, the Bank of Canada’s rate decision could introduce volatility and uncertainty into the market, impacting the value of the Loonie. It is essential for market participants to stay informed and adapt their strategies accordingly to navigate these changing conditions.