Scotiabank Rebound In Usdcad Highly Likely Unless 133 Support Breaks

Scotiabank Rebound In Usdcad Highly Likely Unless 133 Support Breaks by Andrew Blumer last updated on July 03, 2023

Scotiabank: Rebound In USD/CAD Highly Likely Unless 1.33 Support Breaks

According to Scotiabank economists, the USD/CAD pair could see a rebound unless the support zone located near 1.33 breaks down. In addition, the USD/CAD is also undergoing double-digit daily losses, which is not a common sight and thus also points towards a possible correction.

If we look at the USD/CAD technical outlook, all indicators point towards a bearish USD. For all starters, the USD/CAD is trading below all the MA signals (short, medium & long-term). In addition, the momentum and the trend indicators are also bearish across all the timeframes, including the hourly, daily, & weekly.

1.33 Support Is Important

All of these technical signals suggest strength for the CAD and weakness for the USD. However, the one signal that hints towards a correction in the USD/CAD pair is the support at the 1.33 level.

Unless this support is pierced by the CAD bearish soon enough, the chances of a near-term reversal are very high. This will see the USD/CAD pair climb higher, signaling strength in the USD and a potential weakness in CAD.

On the fundamental side, the USD is also under heavy pressure as traders await the Fed to announce its policy shift. If the Fed decides to leave rates unchanged, it could favor the CAD in theory. On the contrary, a surprise rate hike will favor a bullish USD and thus will support the USD/CAD bullish case.

If we look at USD/CAD from purely a technical point of view, it appears that correction is likely. On the other hand, the fundamental outlook is bearish for the USD and signals more downside in the USD/CAD.

Based on these contradictory views, it makes sense to wait for the upcoming Fed meeting. Once the meeting is over, the fundamental outlook will become clear, which will ultimately also clear the technical outlook in the USD/CAD.

But even if the USD/CAD stages a bullish recovery in the short term, we can't ignore the long-term bearish signals as well.