USD/CAD raises strongly above 1.2600, leaves the 200-DMA below

• USD/CAD reaches a weekly new high at 1.2630.
• The trend could be changing, as the price leaves the 200-day moving average level.
• Risk-off market sentiment weighs on the Canadian dollar.

USD/CAD rises for the second day in a row, up 0.35% in the day at 1.2614, and leaves the 200-day moving average behind. Previously the pair posted a new high for the week at 1.2630.

The overall tone in the markets is cautious, spurred by the Afghanistan conflict escalating, covid fears and China’s tightening regulations toward Internet businesses. These conditions keep investors uncomfortable, thus prompted flows towards safe-haven assets.

Earlier in the day, the Housing Starts from Canada were released. The readings were worse than expected at 272.2K vs 280K estimated. Meanwhile, in the US, retail sales fell 1.1%, vs 0.3% foreseen by the market. There was no market reaction toward data releases.

USD/CAD technical outlook

The Loonie trades at 1.2615 up 0.33%, above the 200-day moving average which sits at 1.2560, so it seems that an uptrend could be in place. This challenges the falling slope trendline from March 2020 highs around 1.4600 to June 2021 lows around 1.2000. As prices move higher, the next resistance level is at 1.2700, followed by July 19 high at 1.2807, then the June 28 high at 1.2881. The short-term trend is tilted to the upside. The 50-DMA is in between the 200 and the 100-DMA with a rising slope, closing to 1.2450. 

RSI is 59.38 and slightly rising, while the Average True Range (ATR) is 77 pips and upwards.

Resistance: 1.2700, 1.2807, 1.2881.

Support: 1.2560 (200-DMA), 1.2500, 1.2474 (July 30 low)