Two trades to watch: USD/CAD, DAX

Fiona Cincotta
By :  ,  Market Analyst

USD/CAD rises ahead of BoC rate decision

USD/CAD is on the rise, paring losses from the previous session. Despite weaker than expected Canadian GDP data and falling oil prices, the loonie managed to gain ground yesterday.

Oil initially rallied yesterday after the EU banned Russian oil imports. However, rumors that OPEC+ could suspend Russia from the group and raise oil output pulled oil prices lower..

Today USDCAD is rising on a stronger USD as hawkish Fed bet return and ahead of the BoC rate decision.

The BoC is expected to raise rates by 50 basis points after a 50 bp hike in April, its largest hike in 22 years. With inflation at 6.8%, a 3-decade high, and unemployment at 5.2%, and falling, the BoC could hike by 75 bp.

The USD is finding support from rising hawkish Fed bets after Christopher Waller spoke of more outsized hikes.

Attention will also be on US ISM manufacturing data, JOLTS job openings, and plenty of Fed speakers.

 Where next for USD/CAD?

USDCAD has been extending its decline from the 2022 high of 1.3080, falling below the 50 sma, the rising trendline support, and is currently testing support at the 200 sma. This, combined with the bearish RSI, points to further losses.

Moves higher could quickly be met with a fresh supply. Resistance can be seen at 1.2715 the 50 sma, with a break above here opening the door to 1.2785, a level which has offered support and resistance on numerous occasions across the past 6 months.

Sellers need to break below the 200 sma at 1.2660, ahead of 1.2630, the overnight low and 1.26 round number, and 1.2585, the March 3 low.

usdcad chart

DAX rises despite tanking retail sales, manufacturing PMI due

The DAX fell yesterday after the EU banned Russian oil imports and as risk sentiment faltered on surging inflation fears.

Today the DAX, along with European peers is attempting to rebound. Investors are shrugging off German retail sales with showed sales tanking -5.4% MoM, down from -0.1% and well below 0%. The data suggest that surging inflation is impacting consumer behaviour.

German manufacturing PMI data is due to show that activity grew at a slightly faster pace in May at 54.7, up from 54.6. The data comes as concerns over rising prices and supply chain issues cloud the outlook.


Where next for the DAX?

The DAX extended its recovery from 13280 rising above the multi-month falling trendline and the 50 sma, before running into resistance at 14600.

The price has eased lower from 14600, although the RSI remains in bullish territory, hinting at further upside.

Buyers will look for a move over 14600 to extend the bullish trend towards 14930 and the 200 sma at 15065.

Sellers will look for a move below 14250 tge May 18 high, to expose the 50 sma at 14140 and the falling trendline support at 13940. A fall below here negates the near-term uptrend.

DAX chart

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