Fed Uncertainty Drives USD/CAD’s Intriguing Movements
USD/CAD posts moderate losses above 1.3800, with eyes on US UoM data.
- Friday saw the end of the USD/CAD’s four-day winning streak.
- Federal Reserve Chair Powell expressed uncertainty regarding whether rates are sufficiently high to tackle inflation effectively.
- Market expectations point to a 90% likelihood of the Bank of Canada maintaining interest rates at their upcoming December meeting.
- Traders will closely monitor Fed’s Logan speech, the Michigan Consumer Sentiment Index, and the UoM 5-year Consumer Inflation Expectation data.
During Asian trading hours on Friday, the USD/CAD pair registers slight declines above the psychological support level of 1.3800. A marginal intraday dip in the value of the US dollar, coupled with a rebound in oil prices, limits the upward potential of the USD/CAD pair. Presently, the pair is trading around 1.3805, marking a 0.01% decrease for the day.
On Thursday, Federal Reserve Chair Jerome Powell’s somewhat hawkish remarks propelled the US Dollar (USD) to a broad increase. Powell expressed uncertainty regarding whether current interest rates are sufficiently elevated to effectively combat inflation, adding that if tightening policy further is necessary, they won’t hesitate to act. Currently, there’s a 20% likelihood of additional rate hikes in the January meeting, while markets expect Fed rate reductions by June 2024.
Regarding the Canadian dollar, the Bank of Canada (BoC) mentioned post-rate decision that further rate increases might not be required if inflation aligns with the central bank’s projections. Moreover, there’s a 90% market expectation for the BoC to keep interest rates unchanged at its December meeting. Additionally, the Loonie, tied to commodities, might see a lift from the rebound in oil prices given Canada’s position as a primary oil exporter to the US.
With no significant economic updates from Canada on Friday, the USD/CAD pair’s movement hinges on shifts in the USD. Investors are attentive to the Fed’s Logan speech before the release of US data, notably the preliminary Michigan Consumer Sentiment Index and UoM 5-year Consumer Inflation Expectation data. These events might significantly influence the trajectory of the USD/CAD pair.
USD/CAD TECHNICAL ANALYSIS DAILY CHART:
Technical Overview
USD/CAD is currently trading within a up channel.
USD/CAD is positioned above all Moving Averages (SMA).
The Relative Strength Index (RSI) is in the buying zone, while the Stochastic oscillator suggests a positive trend.
Immediate Resistance level: 1.3818
Immediate support level: 1.376
HOW TO TRADE USD/CAD
The USD/CAD is within an upward channel, displaying a pattern of higher highs. Recently, the price surged but then retracted, retracing to the 50% Fibonacci level before initiating another upward movement. It’s currently hovering around a crucial resistance zone, and a breakthrough here might indicate a potential for further upward movement.
TRADE SUGGESTION- STOP BUY – 1.3825, TAKE PROFIT AT- 1.3896, SL AT- 1.3782.