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As the USD Falls, Bears Are Gaining Control of the USD/CAD Pair

November 23, 2021

Talking Points:

  • Bears take control of the USD/CAD as the USD loses ground.
  • Following new highs, the USD has moved into a sideways consolidation.

In early Asian trading, the USD/CAD is trading flat around 1.12699. Following the overnight bid in the USD, the price is around 1.2700 and in the hands of the bears.

After President Joe Biden re-nominated Federal Reserve Chair Jerome Powell for a second four-year term, the USD hit a 16-month high against the euro on Monday, with the US dollar index (DXY) leaping to a new high.

The White House said that Lael Brainard, a member of the Federal Reserve Board and the other leading candidate for the role, will serve as vice-chair. The DXY climbed 0.42 % on the day to 96.53, its highest level since July 2020.

CAD Holds its Ground

Meanwhile, reflecting the Bank of Canada’s (BoC) hawkish tone, CAD’s net positions have remained positive for the fourth week in a row. Given the current battle amongst central banks, the forthcoming meeting will be crucial.

However, the Bank of Canada is ahead of the game, and a move by the Reserve Bank of New Zealand would likely back BoC hawkishness and support the commodity currency.

Experts from the ANZ Bank said that ”We expect a 25bp hike, but the market has gotten itself all tied up in knots expecting a super-hawkish tone. Yet in reality, downside risks are emerging and higher swap/mortgage rates have already done the heavy lifting. Could the Kiwi have had its best days for 2021? Maybe.”

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