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How to Trade USD/CAD: 24th July
Trading the USD/CAD currency pair, often referred to as “the Loonie,” can be both exciting and challenging, particularly in the current economic climate. The nickname “Loonie” comes from the image of a common loon, a bird native to Canada, which is featured on the Canadian one-dollar coin.
Bank of Canada’s Rate Cut
Recently, the Bank of Canada reduced interest rates from 4.75% to 4.50%. This decision was driven largely by a rise in the unemployment rate, which climbed to 6.4% in June. The central bank aims to stimulate economic growth and boost employment through this rate cut. Lower interest rates can weaken a currency, making Canadian Dollar (CAD) an attractive sell in the forex market.
Currency Strength Meter Insights
The currency strength meter currently positions the Canadian Dollar as the third weakest currency. This makes CAD an ideal candidate for selling, especially when paired with stronger currencies like the US Dollar (USD). Traders often look to sell weaker currencies and buy stronger ones to capitalize on these trends.
Commitment of Traders Reports
The Commitment of Traders (COT) reports reveal significant buying activity from commercial traders. This level of buying could indicate that the USD/CAD pair is nearing a top, suggesting that a price reversal might be on the horizon. Monitoring the COT reports can provide valuable insights into market sentiment and potential turning points.
Technical Analysis
From a technical perspective, USD/CAD has been trading higher after finding solid support at the 1.3600 level. The price is now approaching the weekly range highs of 1.3900. This zone could serve as a critical turning point for the pair. If the price fails to break above this resistance, it may signal the beginning of a downtrend.
Trading Strategy
Given these factors, a potential strategy could involve looking for selling opportunities if the price action shows signs of reversing around the 1.3900 level. Traders should watch for bearish patterns or confirmation signals before entering a short position. Additionally, keeping an eye on further economic updates from Canada and the United States will be crucial in making informed trading decisions.
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