USD/CAD up another 0.7% on the day to 1.2921
Commodity currencies are continuing to be pressured this week and there is little reprieve now across the board when you look at the charts.
The loonie is no exception as we are starting to see cracks unravel with CAD/JPY in particular looking like it is going to snap sharply lower at any second.
As the dollar keeps more resilient on the week, USD/CAD has broken to its highest levels since February yesterday and is now trading to its highest levels for the year as we see a significant retracement higher in the pair take shape.
The 1.3000 mark is where I see this hitting before any form of plausible reprieve for the loonie, with the 38.2 retracement level at 1.3023 perhaps helping to offer some resistance before traders reassess the next move in the pair.
I outlined some thoughts about the currency earlier:
All that being said, the fundamental picture is one that will be tough to make sense of.Canada is among the frontrunners in the vaccination race and the economy is still staying on the path to recovery with the latest virus surge due to the delta variant not really taking off in the country as it is elsewhere globally.Adding to that is despite worries in the oil market on a stronger dollar and a hit to the demand outlook, it is tough to envisage a total meltdown as virus restrictions this time around are surely not going to be anywhere as bad as they are last year.Not to mention that as vaccinations pick up, rightfully so will economies and demand conditions will follow accordingly based on that presumption.Also, not forgetting that the BOC is not straying away from normalising/tightening policy so there's also a strong case of divergence on that front.Nonetheless, the focus in the market right now is that commodity currencies are out of flavour until something else enters into the spotlight. And as a trader, there's no point in arguing with the charts as that ultimately defines a trade and the risks involved.
