© Reuters.
By Ketki Saxena
Investing.com — The continued to weaken against its US counterpart today, as sentiment remained downbeat following a hawkish outlook from the Federal Reserve at its monetary policy announcement on Wednesday, and subsequent rate-hikes from global central banks.
The commodity-linked loonie was also pressured by a slide in crude prices on worries of demand destruction driven by the central bank’s aggressiveness, and mounting COVID-19 cases and rising fatalities in China.
The greenback meanwhile was boosted by the rising risk-aversion, gaining modestly against a basket of major currencies after a sharp rally yesterday, as The Fed’s stance and rate hikes from the European Central Bank and the Bank of England kept a damper on investor sentiment. Today, hawkish commentary from Fed policymakers further fuelled risk aversion, further boosting the US dollar.
Federal Reserve Bank of San Francisco President Mary Daly said policymakers remained “far away from our price stability goal” and still had a “long way to go” before inflation is under control.
Federal Reserve Bank of New York President John Williams meanwhile flagged the possibility of a higher than the planned interest rate, doing “ “what’s necessary,” to reduce inflation to the Fed’s 2% goal. The Fed Fund rate is currently seen at 5.1%.
The risk-sensitive Canadian dollar was also pressured by a slide in crude prices, which fell about $2 per barrel on Friday as worries of a recession remained the theme of the day, driven by hawkish central banks. prices were also pressured by the partial restart of the Canada-to-U.S. Keystone pipeline that had been shut down last week due to an oil spill.
President Biden’s decision to loan 2 million barrels of the US’s Strategic Petroleum Reserves to domestic US companies affected by the Keystone pipeline also helped ease immediate supply concerns, and add downwards pressure to prices.
Worries of Chinese demand destruction also weighed on the crude – this time due to the paring back, rather than the re-implementation of the long lockdowns that have shuttered growth in the world’s second-largest economy, and largest consumer of crude.
From the point of view of technical analysis, analysts at FC street note that “The trend on the currency pair has changed to bullish. The price is trading above the moving averages, and the MACD indicator is positive again. Buy trades should be considered from the support level of 1.3601, but with additional confirmation. For sell deals, it is best to consider the resistance level of 1.3690, but with confirmation in the form of a reverse initiative or after a false breakout, since the level has already been tested.
Alternative scenario: if the price breaks down and consolidates below the support level of 1.3386, the downtrend will likely resume.”
