A press conference held by Donald Trump on Wednesday triggered volatility in the currency markets with a sharp fall in the Greenback. USD/CAD dropped to fresh lows for the week and briefly broke below a critical rising trendline that dates back to the early May. Losses were not sustained and a recovery shows the pair regaining the trendline.
The rising trendline in USD/CAD connects the 2016 low posted in May with the low printed in August. The trendline held the pair higher in December, ahead of the Federal Reserve monetary policy meeting. While the pair scaled below the trendline on an intraday basis, a recovery is accompanied by a 4-hour bullish hammer print that closed above the rising trendline. The daily close will be important in further assessing if the trendline holds.
Donald Trump held his first press conference since the elections today. There was some expectation for forward guidance in regards to heavily anticipated tax reforms and a stimulatory fiscal policy. The US Dollar rose ahead of the press conference in anticipation, but markets were dissappointed as the speech took another direction. The President-elect focused on his exit from the Trump organization, outlining his intentions to pass leadership to his sons in order to prevent a conflict of interest. Media questions were concentrated on recent unsubstantiated reports that Russia had incriminating evidence against Trump, concerns were promptly dismissed by the President-elect.
Oil prices soared on the weaker Dollar with WTI crude oil prices (USOIL) rising 3.16%, as of the North American close. The recovery has served to print a bullish engulfing candle on a daily chart, to snap a prior three-day losing streak. Despite today’s recovery, USOIL trades lower by 2.40% for the week thus far.
The US Dollar index (DXY) rose from the European open to scale above Tuesday’s highs but gains were capped ahead of the speech. DXY dropped sharply during the press conference to test support from lows posted earlier this week. While a bounce has materialized, a bearish engulfing candle on the 4-hour chart suggests that recoveries will be short-lived.
The decline in USD/CAD today fell short of testing the 200-period daily moving average as the indicator resides at 1.3098 while the exchange rate touched a low of 1.3119. The rising trendline continues to be an important technical indicator for the near to medium-term trend for USD/CAD. While the trendline has held the pair thus far, there has not been any indication of a turn higher in the broader uptrend seen since early May. Upside resistance at 1.3282 was briefly breached ahead of Trump’s speech today but gains were not sustained. In the event the pair recovers from the rising trendline support, a breach of the 1.3282 level will provide additional confirmation that support is holding.