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June 8, 2021

USD/CAD Deep Dive Market Analysis (6/8/2021)

Frank Cabibi

Market of the Week:

UC has been under some steady selling pressure for a year now as the fed's decision to print trillions of dollars to stimulate the economy a year ago is still affecting the value of the dollar today. COT has shown the constant increase in short positions on the USD for 12 months while big money shifted more into the loonie. Now, we are seeing something a little different that could spark a trend reversal, for at least in the short term.

Fundamental Analysis

Bond Yields:

Yields have fallen to 1.53% today sparking an increase of demand for the USD as the dollar index rose by +0.08% today. This mixed sentiment shows concern overall since falling yields should help stocks rise while the dollar sinks; this buying of the dollar before inflation news later this week may just be an accumulation of long positions before a dump after the news.

COT:

COT reports show a buying of the US dollar and the Canadian loonie as of last Tuesday. Building positions on both shows more mixed sentiment overall on the USDCAD pair as it trades mostly sideways day after day.

Unemployment and Inflation:

Recent numbers show a higher unemployment rate in Canada which is at 8.2% compared to the US's 5.8%. Inflation looks pretty bad for both currencies as the US sits at 4.2% inflation versus Canada's 3.4%.

Technical Analysis

USDCAD on the 4H chart still in its consolidation zone, and forming a short term uptrend. Price is between key levels of support and resistance around 1.20079 and 1.21383 respectively. If price continues to climb and hit resistance, it may have a decent chance of breaking out to the upside on strong USD news. However, it is still likely that price will continue the channel sideways. I believe the pair is just consolidating before the big inflation news this Thursday.

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