- The price of gold rises by more than 1%, as risk-off market sentiment drives up demand for safe assets.
- The price of gold continues to rise, approaching 1.2800 as risk-off market sentiment increases following the introduction of the COVID-19 variant.
- COVID-19 NU, which appears in South Africa, caused a selloff of assets with the “risk” word appended, boosting safe-haven currencies.
- A breakout above 1.2800 may lead to a rally toward the YTD high of 1.2948.
According to live rates, the USD/CAD rises on worries from market participants about the new COVID-19 version introduced in South Africa, climbing 1.01 percent to 1.2777 at the time of writing. The session has been driven by market sentiment, with the NU COVID-19 variant identified in South Africa, which appears to have more variations and dodging vaccines. Many nations, such as the United Kingdom, Singapore, and Israel, include African countries on their red lists. Japan also implemented stricter border controls.
On Thursday, in the overnight session, when liquidity conditions were poor, and the New York trading session was shorter, the pair’s volatility rose considerably. The NU COVID-19 variant’s announcement caused the rally, which churned through all of the daily pivot levels on its way north, trading at fresh two-month highs approaching 1.2800, just as it was nearing completion.
USD/CAD Price Forecast: Technical outlook
The USD/CAD pair is pushing higher. On the way up, the September 29 swing high resistance of 1.2774 was broken, leaving the year-to-date high of 1.2948 as the last line of defence for USD/CAD bears. Nonetheless, in overbought situations, the Relative Strength Index (RSI) is at a reading of 73, suggesting that the pair might consolidate before USD/CAD traders can determine which way the pair will go.
The first psychological resistance is at 1.2800, which would be the first line of defence in another advance. The September 20 swing high at 1.2895 and the year-to-date August 20 cycle high at 1.2948 is potential supply zones to watch if a breach occurs.
In this scenario, the September 29 swing high would be the first support. A break below that level will expose the 1.2700 psychological barriers, with a retest of the November 25 high at 1.2676 to follow.
The Canadian dollar is being tested against a strong US dollar. If upcoming US inflation data confirm market expectations of a succession of US interest rate increases next year, things could get even worse for the Loonie. Today’s US data releases, as well as the latest FOMC minutes, are anticipated to set the tone for the dollar in the coming days, owing to a shortened week caused by Thanksgiving in the United States on Thursday and a half-day market session on Friday.
As US rate hike expectations continue to rise, the Canadian dollar is one of several vital currencies weakening against the USD. The US 2-year’s current yield is approximately 0.60%, while the benchmark 10-year has a yield of 1.65 percent, eight basis points below the recent multi-month high of 1.73 percent. The pair moved lower after a three-month consolidation period, eventually closing below the August 20 high of 1.2949 on Friday. In the long run, however, the recent “V” formation rebound from the October 21 low may have played out, leaving the pair in need of a range.
According to data from retail traders, 58.97 percent of traders are net-long, with a ratio of longs to shorts of 1.44 to 1. The amount of net-long traders increased by 5.60% over the previous day and decreased by 17.18% from the preceding week, whereas the number of net-short traders was 3.46 percent smaller today than yesterday and 25.63 percent greater than last week.
Traders’ net-long positions suggest that USD/CAD prices may continue to fall, and we typically take a contrarian approach to crowd sentiment. The pair is just a fraction of a percent away from the 0.9985 mark, but it’s considerably further from the support level at 0.9974. With the current mood and recent adjustments, it appears that the USD/CAD trading range has expanded even more.