Moving against the tide, the Canadian dollar currency trade failed to show a strong performance even though the central bank has acted aggressively in raising interest rates.
The Bank of Canada (BOC) since last March has remained aggressive by raising interest rates by 75 and 100 basis points until the latest interest rate was recorded at 3.25%, the highest in 14 years.
However, the Canadian dollar failed to strengthen and instead experienced a depreciation in the market due to aggressive rate hikes by the central bank pushing the economy to continue moving rapidly towards recession.
In addition, the price of oil, which is an important currency-sensitive commodity trade, also added to the pressure when it experienced a decline for 3 consecutive weeks affected by the economic shutdown in China.
Examining the price movement on the chart of the USD/CAD currency pair, the price has displayed a bullish pattern towards the end of last week showing that the Canadian dollar is trading weak against the dominant US dollar.
Investors will also be alert for the movement of the US dollar this week ahead of the FOMC meeting which is seen to continue to put pressure on the Loonie.
If observed, the price started to surge on Tuesday last week after the release of the US inflation data from the level of 1.29600 until the height level was reached last Friday at 1.33000.
The movement of the bullish trend above the support level of the Moving Average 50 (MA50) on the 1-hour time frame on the USD/CAD chart saw that the price has successfully broken through the resistance of 1.32000 which had previously been blocking the price since last July.
With the rise to the latest high it has recorded a recent 2-year high after the last time the price traded around that was in September 2020.
The displayed price pattern still shows the tendency of the price to continue the higher rise earlier this week with the latest target to head towards the high level of 1.34000.
However, if the price fails to pass the 1.33000 level and starts to make a decline below the MA50 support level, the expectation for an early trend change will push the price to test the 1.32000 level at the latest RBS (resistance become support) zone.
A further drop in price will lead back to the 1.31000 level and could reach up to 1.30000 after the bullish pattern of last week has ended.
