The ongoing trend

Following the assassination attempt on Republican US presidential candidate Donald Trump, the USD/CAD currency pair rose to 1.3695, returning to the long-term uptrend channel.

Experts believe that this event has strengthened the politician's rating. If he wins the election, the presidential administration will move to a more aggressive trade policy, imposing new tariffs on foreign imports (primarily from China and the EU), as well as significantly adjusting corporate and personal taxes. The easing of fiscal pressure may lead to an increase in public debt and a renewed acceleration of inflation in the medium term, forcing the US Federal Reserve to keep interest rates at their highest level or even raise them again. The likelihood of such a development supported the US currency, but the growth of quotes is currently being held back by the latest statements by the head of the US Federal Reserve, Jerome Powell: the monetary authority said that the regulator will not wait until inflation reaches the target of 2.0 percent to ease monetary policy. Investors interpreted his rhetoric as a signal to take decisive steps in this direction in the near future. The dominance of monetary factors will therefore continue to put pressure on the dollar's position, as the US presidential election will take place in November and the adjustment of borrowing costs could occur as early as September.

The Canadian dollar is likely to continue its positive momentum due to renewed inflation growth, as the consumer price index rose from 2.7% y/y to 2.9% y/y in May and the core rate rose from 1.6% to 1.8%. As expected, today's statistics reflect the continuation of the sharp increase in the index, so that it will be at 2.9% in June. The core rate will be adjusted from 1.8% to 1.6%. This increases the likelihood of a pause by the Bank of Canada in reducing borrowing costs.

Support and resistance

The trading instrument is near the mark of 1.3702 (Murrey [5/8]), after which an increase to the area of ​​1.3763 ​​(Murrey [7/8]) and 1.3793 (Murrey [8/8]) is expected. In case of consolidation of the quotes below the mark of 1.3660 (middle line of the Bollinger Bands), they may again leave the ascending channel and continue the decline to 1.3610 (Murrey [2/8]) and 1.3585 (Murrey [1/8], Fibonacci correction 38.2%).

Technical indicators are not uniform: Bollinger Bands are reversing upwards, MACD is reducing in the negative zone, Stochastics is coming close to the overbought zone and may show a reversal move downwards.

Supports: 1.3660, 1.3610, 1.3585.

Resistances: 1.3702, 1.3763, 1.3793.

Trading Tips

Short positions are intact below 1.3660 with target of 1.3610, 1.3585 and stop loss at 1.3690. Validity: 5-7 days.

Long positions are current above 1.3702 with price target of 1.3763, 1.3793 and stop loss at 1.3655.