Commodity dollars have been pushing higher thanks to growing risk appetite as global lockdown eases...
Thanks to another
sharp rally in the equity markets, safe haven US dollar has weakened most notably against the euro following the release of some stronger data from the single currency bloc this morning. The Aussie and kiwi gained ground during Asian hours, although the other major commodity dollar, Canada’s currency, has yet to respond in a meaningful way. However, that could change as we transition to the North American session and given last week’s price actions.
North American investors will look forward to today’s release of the ISM Non-Manufacturing PMI, due at 15:00 BST. It is expected to have risen to 50.0 from 45.4 previously. Unless this turns out to be significantly weaker than expected, then it is likely that risk assets will respond positively to the data and, as it has become a trend, the dollar could paradoxically weaken if it matches or beats expectations.
From a technical point of view, 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 last week, the selling resumed as we ended a three-week winning streak:
Source: TradingView.com and ThinkMarkets
Last week’s red candle also resulted in the daily chart breaking below a short-term bullish trend line that had emerged over the previous three weeks. Thus, for as long as the USD/CAD holds below last week’s low of 1.3545 on a daily closing basis, the path of least resistance would be to the downside. Thus, I wouldn’t be surprised if the USD/CAD resumes lower after bouncing off its lows this morning.