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On August 30th, Iranian Deputy Foreign Minister Gharibabadi stated on August 29th that Iran and Oman had reached an understanding on passage arrangements in the Strait of Hormuz, but this understanding would not automatically enter the implementation phase. Gharibabadi indicated that unless the United States fulfills its obligations, the understanding between Iran and Oman regarding the Strait of Hormuz will not enter the implementation phase, and Iran is in no hurry to reopen the Strait of Hormuz.On August 30th, it was reported that on August 29th local time, Magnus Brenner, the European Commissioner for Home Affairs and Migration, stated that Spain had requested further support from organizations including the European Border and Coast Guard, Europol, and the European Asylum Service in response to the migration crisis. The EU is processing the request and will make a decision quickly. He emphasized that the current priority remains the swift repatriation of those illegally residing in the Spanish enclave of Ceuta. Ceuta experienced a large-scale smuggling incident at the end of July, and thousands of illegal immigrants remain stranded there. Spain requested EU assistance on August 28th to address the migration crisis.On August 30th, the U.S. Embassy in Beirut, Lebanon, issued a statement on Saturday stating, "When Hezbollah decides it is ready to do so, it can engage in dialogue with the Lebanese government. We are already in dialogue with the Lebanese government and can tell them that Hezbollah is ready to surrender its weapons. At that time, we can try to bring the positions of all parties closer together." The U.S. Embassy continued, "But for now, Hezbollah is unwilling to engage in dialogue with either the Lebanese government, or with us or Israel, because it is simply following orders from Iran."On August 30th, the National Park Service endorsed President Trumps proposed 250-foot-high triumphal arch, despite the agency finding that the project would negatively impact historic heritage and views around Washington, D.C. "The proposed arch continues historical tradition, introducing a visual focal point that reflects the intended character of the site and celebrates the 250th anniversary of American independence," the federal agency wrote in a report released Friday. However, the report also confirmed that dozens of historic sites, including the Lincoln Memorial, the Washington Monument, and other landmarks, would be negatively affected. The anticipated "adverse impacts" relate to changes in views and the skyline, rather than any physical damage to these historic buildings.On August 30th, it was reported that on August 29th local time, the Israeli State Security Directorate (Shin Bet) confirmed that Prime Minister Benjamin Netanyahus eldest son, Yair, had faced a "significant" security threat while in the United States. Therefore, Shin Bet decided to urgently evacuate him and his security team back to Israel. Netanyahu has two sons. In an interview on August 24th, he claimed that Iran had "attempted to assassinate one of his sons." However, he did not reveal which son it was, nor did he specify the time of the incident. Subsequent reports indicated that Netanyahus eldest son, Yair, became an Iranian "assassination target" while living in Florida, USA.

The USD/CAD Exchange Rate Retreats from the 50-Day Simple Moving Average Ahead of the Bank of Canada's Rate Hike

Drake Hampton

Apr 13, 2022 09:49

Discussion Points Regarding the Canadian Dollar 

USD/CAD is struggling to maintain its early week gains as the US Consumer Price Index (CPI) update triggered a bearish reaction in the US Dollar, and the Bank of Canada's (BoC) interest rate decision may weigh on the exchange rate as the central bank is expected to deliver its third rate hike in 2022.

USD/CAD Rate Reaches 50-Day Simple Moving Average Ahead Of Boc Rate Hike

USD/CAD eases off a new weekly high (1.2662) as a smaller-than-expected increase in the core measure of US consumer prices reinforces the Federal Reserve's expectation that "firming monetary policy, combined with a gradual fading of supply–demand imbalances, would help to anchor longer-term inflation expectations and eventually bring inflation down."

 

As a result, the Federal Open Market Committee (FOMC) may seek to unload its holdings of Treasury securities, agency debt, and agency mortgage-backed securities later this year, and the BoC meeting may bring an end to the recent series of higher highs and lows in USD/CAD, as the central bank is expected to deliver another 50 basis point rate hike.

 

Simultaneously, the Bank of Canada may announce plans to wind down its balance sheet when Governor Tiff Macklem and Co. release their quarterly Monetary Policy Report (MPR), and any change in the central bank's exit strategy could trigger a larger pullback in USD/CAD as the exchange rate struggles to break above the 50-Day SMA (1.2660).

 

Nonetheless, expectations for a further shift in Fed policy may keep USD/CAD afloat ahead of the central bank's next interest rate decision on May 4, as Governor Lael Brainard has stated that the central bank could "reduce the balance sheet at a rapid pace as soon as our May meeting," and a further advance in the exchange rate may continue to alleviate the downward trend in retail sentiment seen last year.

 

The number of traders who are net-long has decreased by 5.59 percent from yesterday and 17.80 percent from last week, while the number of traders who are net-short has increased by 2.35 percent from yesterday and 14.47 percent from last week. The fall in net-long interest has controlled crowding behavior, as 73.79 percent of traders were net-long USD/CAD last week, while the increase in net-short interest coincides with the exchange rate's effort to reclaim the 50-Day SMA (1.2660).

 

With that said, the Bank of Canada's rate decision may jeopardize the advance from the yearly low (1.2403) if the central bank implements a 50bp rate hike and begins quantitative tightening (QT), but USD/CAD may continue to retrace the decline from the March high (1.2901) if Governor Macklem and Co. adopt a predetermined course for monetary policy.

Daily Chart of the USD/CAD Exchange Rate

Keep in mind that USD/CAD appeared to be on pace to test the November low (1.2352) in March, but a lack of impetus to close below the Fibonacci overlap between 1.2410 (23.6 percent expansion) and 1.2440 (23.6 percent expansion) has brought the exchange rate back towards the 50-Day SMA (1.2660).

 

A closing above the 1.2620 (50 percent retracement) to 1.2650 (78.6 percent expansion) region would be required to bring the 1.2770 (38.2 percent expansion) level to the forefront, with the next zone of interest coming in around 1.2830 (38.2 percent retracement) to 1.2880. (61.8 percent expansion).

 

However, a failure to trade above the 50-Day SMA (1.2660) might send USD/CAD down towards the 1.2510 (78.6 percent retracement) region, with the next area of interest located between 1.2410 (23.6 percent expansion) and 1.2440. (23.6 percent expansion).

 

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