The spot Canadian dollar closed one-third of a cent or 34 basis points lower on Tuesday, its largest one-day loss shown since June 14. Since the middle of July, the spot dollar has shed 148 basis points, or 1.9%, sinking to the lowest level traded in more than six weeks.
The red bars on the histogram on the lower study shows investors paring their bullish net-long position in the Canadian dollar for the first time in four weeks, as seen in July 30 data.
Last week's Statistics Canada Merchandise trade report for June pointed to a 5.1% drop in the country's exports in June, a bearish feature for the dollar, while Canada is being viewed as "collateral damage" in the growing trade tensions faced between the United States and China.
On the supportive side, the U.S. just lowered its benchmark interest rate by .25%, while media reports on Tuesday called for further cuts of 0.25% to 1% through the balance of the year. This should be viewed as supportive for the Canadian dollar, although sentiment may be growing that the Bank of Canada will soon be forced to follow suit and trim its benchmark rate which has remained steady since October 2018.
As seen on the attached chart, three levels of potential support for the spot dollar bears watching. First is the 200-day moving average at $0.752225 CAD/USD, which was close to being tested in Tuesday's session. Second is the 50% retracement of the rally from the May 31 low to the July 15 high, calculated at $0.752799 CAD/USD. One more potential level of support lies at the lower-end of the gap in trade formed in June 30, which is shown at $0.747518 CAD/USD.
A breach of these support levels could lead to a further decline to the 61.8% retracement of the discussed uptrend, calculated at $0.749253 CAD/USD. While not shown, momentum indicators on the weekly chart are trending lower, while having just exited oversold territory, while pointing to the potential for continued downside prior to reaching oversold territory on the weekly chart.
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