The Canadian dollar is down slightly in the Monday session. Currently, USD/CAD is trading at 1.2759, up 0.22% on the day.
Short squeeze boosts US dollar
The week ended on a high note for the US dollar, which recorded broad gains. USD/CAD is in positive territory again on Monday, and the pair touched a high of 1.2799 earlier in the day, good enough for a 1-week high. The US dollar has regained its form in the New Year after a dreadful 2020. The slide of the dollar has resulted in so many short positions that the dollar’s rebound has triggered a short dollar squeeze, which has given the dollar some momentum, as we saw on Friday.
Will the dollar upswing continue this week? There certainly is a case to be made that the upward momentum could continue. Janet Yellen, former Federal Reserve Chair, testifies on Tuesday at her confirmation hearing for Treasury Secretary. According to a report in the Wall Street Journal, Yellen is expected to state at the hearing that the value of the dollar should be determined by market forces. These kinds of statements are bullish for the currency. As well, there is an expectation that US yields will rise after Joe Biden is sworn in as president on Wednesday, which would likely boost the dollar.
It’s a busy week for Canadian events, highlighted by the Bank of Canada rate decision on Wednesday. The data was a mix on Monday, which resulted in a muted response from the Canadian dollar. Housing Starts slowed to 228 thousand in December, down from 246 thousand. Still, this was within expectations. As well, foreign investors bought C$11.8 billion of Canadian securities in November, up sharply from C$6.92 billion and more than double the forecast of C$5.05 billion.
- USD/CAD tested resistance at 1.2791 in the Asian session. Above, there is resistance at 1.2843
- The first line of support is at 1.2663, followed by support at 1.2585
- If the pair continues to move higher, the 50-day MA, currently at 1.2870, could be under pressure
For a look at all of today’s economic events, check out our economic calendar. www.marketpulse.com/economic-events/
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