The USD/CAD managed to surpass the May high (1.3077) to set a new high (1.3079) in June, but the latest advance has failed to raise the RSI over 70, thus the exchange rate may largely mirror the price movement from May.
Due to the small response in the foreign exchange markets to Fed Chairman Jerome Powell's testimony and the central bank chief's warning that it will be "very challenging" to advertise a soft-landing for the US economy, the advance from the June low (1.2518) may continue to unravel. The next Federal Open Market Committee (FOMC) interest rate decision will be made on July 27.
The Bank of Canada (BoC) may be prompted to take additional steps to combat inflation as a result of the update to Canada's CPI. The headline reading increased from 6.8 percent per year in April to 7.7 percent per year, and the core rate also showed a similar dynamic, widening to 6.1 percent from 5.7 percent during the same period.
When compared to the previous day and the previous week, the number of traders who are net-long has increased by 26.99 percent, while those who are net-short have decreased by 5.73 percent and increased by 28.42 percent, respectively. As USD/CAD breaks a string of lower highs and lows from the start of the week, the number of traders holding net-long positions has increased. Meanwhile, the number of traders holding net-short positions has increased, which has contributed to the recent shift in retail sentiment. Last week, 52.85% of traders held net-long positions in the pair.
However, given the increase in risk appetite, the currencies of the commodity bloc may make a stronger rebound over the next few days. In addition, as the RSI turns back before reaching overbought territory, USD/CAD may continue to give back the gains made since the monthly low (1.2518).
