As I mentioned yesterday, the US dollar could rise further in the next few months after a
solid first quarter. But the dollar index has started the new quarter and month on the backfoot due mainly to a sizeable rebound for the euro, which gained ground as investors reduced their pessimistic forecasts about timing of the re-opening of the major economies. Bloomberg reported yesterday, citing a memo circulated to national delegations in Brussels, that the European Union’s executive arm says most member states will have sufficient vaccine supplies to immunize the majority of people by the end of June. If correct, this will be sooner than the markets had previously expected, meaning travel restrictions could be lifted ahead of the holiday seasons. Against the pound meanwhile, the US dollar has had a good few days with the cable also being undermined by the rebounding EUR/GBP exchange rate. The US dollar has also started to show signs of life against some commodity dollars recently and with
crude oil struggling for direction, the Canadian dollar could be the next domino to fall. The focus will be on the FOMC minutes, due for release at 19:00 BST. But with several FOMC members having already spoken since the Fed’s last meeting, and as we have had a few solid data releases already, don’t expect too much reaction from the FOMC minutes.
Meanwhile, the Canadian dollar will be in focus as investors look ahead to Friday’s release of Canadian jobs report. After a forecast-beating 259,200 print the previous month, employment is expected to have risen by a more modest 90,000 in March. A weaker number could derail the rally which has been supported by rising oil prices and after the BOC effectively announced an end to its emergency stimulus measures. Still, regardless of the Canadian data, if the US dollar manages to rebound more profoundly given the vaccine rollout success there with the daily dose rate running above 3 million, the USD/CAD could rally anyway. US President Joe Biden has announced that every American adult would be eligible for a vaccine by April 19. This means that 3 quarters of the US population will be vaccinated by around July, if the current pace is maintained.
Now then, the USD/CAD has already broken its weekly bearish trend line, meaning it has potentially formed a low:
Source: ThinkMarkets and TradingView.com
What we need to see next is for price to form a higher high, with the most recent high coming in at 1.2750ish:
Source: ThinkMarkets and TradingView.com
In terms of support, the bulls will need to hold the breakout above 1.2590, otherwise a drop back towards 1.2500 could be on the cards.