- US dollar rebound from 1.3511 has been capped at 1.3595.
- The dollar picked up on risk aversion but it was unable to break above range top at 1.3600.
- USD/CAD: break of 1.3485 will drive the pair towards 1.3331 – Credit Suisse
The greenback extended its rebound from session lows at 1.3511 with the market on a risk-off mood amid growing fears of a second COVID-19 wave and the bleak macroeconomic outlook depicted by FED’s Powell. The pair, however, has been capped again in the vicinity of 1.3600 and remains trading without direction within a 100-pip range above 1.3500.
The pair remains trapped within a 100-pip range
The US dollar has traded firmer on Wednesday with market sentiment weighed by news reporting increases of coronavirus infections in Texas and Florida, while in China, the authorities have reintroduced travel restrictions in Beijing after a new virus outbreak.
Beyond that Federal Reserve Chairman, Jerome Powell increased concerns further, warning that a full US economic recovery is unlikely until the public is confident that the disease is contained. This uncertainty confirms the Bank’s commitment to maintaining its monetary policy support.
On the macroeconomic front, the market has ignored Canadian inflation figures which showed a further contraction in consumer inflation in May. The year on year CPI contracted at a 0.4% pace, following a 0.2% contraction in April while the Core CPI increased 0.7% year on year, well, below the 1.4% rise expected.
USD/CAD: break of 1.3485 will drive the pair towards 1.3331 – Credit Suisse
FX analysts at Credit Suisse see the pair likely to break the current consolidation phase lower, and point out to key support at 1.3485, “USD/CAD is slowly grinding lower, in line with the large bearish ‘descending triangle’ continuation pattern that is still in place. We expect this path to continue and see scope for further weakness, with support initially at 1.3505, then 1.3482/75. Removal of here would see the small base negated and a fresh attempt at 1.3398, then 1.3365/57, ahead of the ‘neckline’.”