Fed Hike Ideas Give The Beleaguered Greenback Support

The US dollar staged a key reversal against the Canadian dollar yesterday. It initially fell to about CAD1.2470, a new multiyear low, before rebounding with gusto through Wednesday's high (~CAD1.26) and closed above it. Follow-though greenback buying sent it to CAD1.2650 today. Nearby resistance is seen in the CAD1.2670 area and then CAD1.2700 area, which also houses the 20-day moving average. The US dollar traded above MXN21.00 for the first time since early November yesterday and is consolidating around it today. The next key level is around MXN20.20, the 200-day moving average, which it has not traded above since last October. The peso had been falling out of favor in the face of rising US rates and government policies that alienate investors. The peso's weakness also may hamper policymakers. Without much fiscal support, monetary policy has to bear the burden. Many expected a 25 bp cut next month, but Banxico may be reluctant if the currency continues to weaken.  

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Read more by Marc on his site Marc to Market.

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