USD/CAD overbought signal is not a clear negative
Repeats with no changes
Nov 1 (Reuters) -Canadian dollar selling has shown little sign of letting up with USD/CAD extending gains through 1.3900, which now puts the pair within touching distance of the 2-year range highs at 1.3975.
Currently, USD/CAD is up over 3% in October – the largest monthly rise since September 2022, which in turn has seen the daily RSI move further into overbought territory having breached 75. While the bearish narrative is well-known, with the softer activity data prompting the Bank of Canada to shift towards larger rate cuts, the sizeable move in the currency does raise the question whether we are at over-stretched levels.
Looking back at prior occasions where the daily RSI broke above 75, as is the case now, this did not necessarily mean that the top was in.
That said, a move above 1.40 is a rarity, with the only two times it has taken place since the global financial crisis being the 2015 oil price collapse and the 2020 COVID crash.
Consequently, should Kamala Harris win in next week’s U.S. election, likely with a less inflationary outlook than under Donald Trump, and his potential for tariffs and tax cuts, USD/CAD lower would be among the better expressions to trade a USD weaker theme.
For more click on FXBUZ
USDCAD daily chart https://tmsnrt.rs/3YGMoOS
cad performance vs rsi 75 https://tmsnrt.rs/3YFY1FI
USD/CAD daily and rsi https://tmsnrt.rs/3YjvpAw
Justin McQueen is a Reuters market analyst. The views expressed are his own. Editing by Alison Williams
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