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USD/CAD 1.1300 breakout undermined - TD Securities

FXStreet (Barcelona) - Shaun Osbourne, Chief FX Strategist at TD Securities explained that USD/CAD’s late-week drop back from the high 1.13s to just below the former cycle-high of 1.1277 undermined the momentum of the breakout.

Key Quotes:

"However, failure to hold below 1.1230 after repeated attempts to push lower also suggests limited downside potential from here at the moment—even if the early tone for USD/CAD this morning is slightly better offered."

"Domestically, this week the focus will be on the BoC’s meeting and release of the MPR on Wednesday. Financial market jitters of late, significantly weaker commodity prices, and softening global growth momentum will play a prominent role in the Bank’s communiqué, offering enough justification for maintaining a neutral stance on the overnight rate, a cautious tone of the overall assessment, and what we expect to be a dovish-sounding stance. Updated economic projections and a discussion of the downward revision to what the central bank considers to the Canada’s neutral policy rate will be featured on the MPR."

"On the charts, the short-term undertone for USD/CAD looks a little soft and the USD’s inability to hold on to last week’s gains through the upper 1.13s leaves quite a large “overhang” on the daily charts in the form of two pretty significant mid-week sell offs and USD/CAD closing around a big figure off its intraday highs both Wednesday and Thursday. These signals form a bearish “shooting star” on the daily candle chart."

"But, as noted above, dips to the 1.1220/30 were well-supported last week and firm, underlying trend momentum suggests limited downside for the market initially this week at least. From here, we might need a break below 1.12 or above 1.14 to get a better sense of direction."

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