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USD/CAD: the US dollar fell amid the election to Congress

7 November 2018, 13:39

TifiaFX

After the results of voting in the primary elections to the US Congress became known, the dollar fell in the foreign exchange market.

The DXY dollar index, which tracks the US currency against a basket of 6 other major currencies, is close to 95.55 at the beginning of the European session on Wednesday, 57 points (0.6%) lower than the closing price on Tuesday.

The pair USD / CAD fell on Wednesday by the beginning of the American session by 0.35% to 1.3080.

As it became known, the Democratic Party on Tuesday gained control of the House of Representatives. Republicans retained a majority in the Senate and the White House.

According to economists, Trump will find it harder to reconcile protectionist measures, which increases the likelihood of rising inflation and a more significant increase in the Fed's key interest rate. Against this background, most likely, the dollar will soon restore lost positions and resume growth.

On Wednesday, market participants will pay attention to the publication at 12:30 (GMT) of the Ivey business activity index (PMI), which assesses the business climate in Canada. The index is an important indicator of market conditions and the economy as a whole.

The Bureau of Statistics of Canada presented last Friday the data according to which Canada’s foreign trade deficit in September amounted to 416 million Canadian dollars (economists expected a surplus of 200 million Canadian dollars). This is the 21st month in a row, when Canada’s monthly trade balance with the rest of the countries remains in the deficit area.

At the same time, the trade deficit with other countries is observed against the background of a simultaneous reduction in Canadian exports and imports.

Bank of Canada Governor Stephen Poloz announced at the end of September that interest rates are expected to gradually increase. In October, the Bank of Canada raised its interest rate by 0.25% to 1.75%.

After weak macro statistics, presented on Friday, some economists concluded that a further increase in interest rates by the Bank of Canada remains in question.

At the same time, the US economy will continue to grow, and the Fed is likely to keep its course and raise the key interest rate again in 2018 and three times in 2019. And this is a strong fundamental factor in favor of further strengthening the US dollar, including in the USD / CAD pair.

*)An advanced fundamental analysis is available on the Tifia Forex Broker website at tifia.com/analytics

Support and Resistance Levels

USD / CAD maintains a positive trend, trading above the key support level of 1.2970 (ЕМА200 on the daily chart). The closest targets in case of continued growth will be the resistance levels of 1.3175 (August highs and the upper limit of the rising channel on the daily chart), 1.3225 (September highs).

The signal for the resumption of long positions will be the growth of USD / CAD in the zone above the short-term resistance level of 1.3105 (ЕМА200 on the 1-hour chart).

Above the support level of 1.2970 long positions are preferred. Above the support level of 1.3055 (EMA200 on the 4-hour chart) purchases look safe.

Only a breakdown of support levels of 1.2740 (Fibonacci level 38.2% of the downward correction to the growth of the pair in the global uptrend since September 2012 and 0.9700), 1.2670 (ЕМА200 on the weekly chart) will cancel the bull trend.

Support Levels: 1.3055, 1.2970, 1.2740, 1.2670

Resistance Levels: 1.3105, 1.3175, 1.3225, 1.3285, 1.3380