The USD/CAD exchange rate is on the rise once again due to a strong bounce in the DXY index. After retesting the yearly lows, the dollar strength index has rebounded strongly. Consequently, major global currencies are losing their value in terms of the greenback.
On Thursday, US Dollar to Canadian Dollar exchange rate rose by 0.15% during its London session. The positive price action follows the 0.18% drop on Wednesday. Canadian Dollar was not the only major currency sliding against US Dollar as the Japanese Yen and Indian Rupee also showed a similar price action.
The latest surge in USD/CAD comes amid a strong bounce in the DXY index. The index fell 0.90% in April 2023 but got a strong rebound in May 2023. Since the start of the month, the index that tracks US Dollar against six major currencies has surged by 1.44%.
At press time, the DXY index is trading at its highest level in the last ten weeks. This rally in the Dollar strength index has weakened the Canadian Dollar in terms of the US Dollar. In the coming days, the pair may have a slight pullback as the DXY approaches its resistance.
I predicted a retest of the 200 MA and a dip below it to grab liquidity in my previous USDCAD forecast. That’s exactly what happened last week. The price dropped below the 200 MA on the daily chart and then closed above it. However, the bulls lack the momentum to push the price higher.
If the price gains acceptance below 200 MA, then USD/CAD forecast will become bearish for at least the short term. This will put a retest of November 2022 low on the cards, which lies at 1.322. However, a strong upward push from here can send the pair to 1.37 very soon if the 200 MA holds on the daily chart.
I’ll keep posting my updated outlook on USD/CAD in my free Telegram group, which you’re welcome to join.
This post was last modified on May 18, 2023, 12:51 BST 12:51