The US dollar has dropped on the back of renewed risk appetite following Tuesday’s pause, with the selling of risk assets showing no follow-through.
Commodity dollars jumped as gold, silver and copper prices broke further higher, which weighed on the greenback.
There wasn’t any obvious catalyst behind the sudden drop in the US dollar and the improvement in risk appetite when Wall Street opened, but investors are relieved that the Chinese equity markets refused to drop following Tuesday’s pause. The outperformance of Chinese equities suggest global demand is going to recovery meaningfully and these expectations are giving investors a reason to get out of dollars and remain in equities.
Source: TradingView.com and ThinkMarkets
Thanks to the improved risk appetite, the USD/CAD bears successfully defended THIS bearish trend line, after Tuesday’s bounce:
Source: TradingView.com and ThinkMarkets
The USD/CAD has been making lower lows and lower highs since risk assets bottomed out in March. In recent weeks, this pair found a base around the 200-day moving average. But following last week’s bearish candle, the longer-term downtrend has probably resumed as we ended a three-week winning streak. Thus, I wouldn’t be surprised if the USD/CAD breaks this week’s earlier low at 1.3520 before dropping to the next potential support at 1.3435/40 next, and potentially further in the coming days.
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