- USD/CAD has retreated from multi-year highs, but the downside appears to be limited.
- Rising oil prices are supporting the loonie and putting pressure on the currency pair.
- The technical setup supports the prospect of some bullish buying.
The USD/CAD pair fell slightly in Asian trading on Wednesday, but did not continue to rise, remaining close to its highest level since April 2020, the previous day. Spot prices are currently hovering just above the mid-1.4100s as traders eagerly await US consumer inflation data and Bank of Canada (BoC) policy decisions before placing bets in a new direction. The rate of decline on this day is less than 0.10%.
Meanwhile, rising oil prices appear to be supporting the commodity-related loonie and putting some pressure on the USD/CAD pair. That said, a bet on a deep central bank rate cut could deter traders from making aggressive bullish bets around the Canadian dollar (CAD). Moreover, the market's growing confidence that the Federal Reserve will take a cautious stance on rate cuts has helped the US dollar (USD) sustain gains recorded over the past three days, a tailwind for the currency pair. It becomes.
From a technical perspective, the recent sustained breakout and acceptance above the 1.4100 mark are considered important triggers for bullish traders. Furthermore, the oscillator on the daily chart remains comfortably in positive territory, still far from the overbought zone, suggesting that the path of least resistance remains to the upside for the USD/CAD pair. I am. Therefore, a further slide could still be seen as a buying opportunity and remain confined near the aforementioned handle, which should now serve as the key point.
Some follow-through selling could lead to weakness below the 1.4070 support zone, prompting an unwinding of the long-term trade and dragging the USD/CAD pair into the 1.4020 area on its way to the psychological mark of 1.4000. The corrective pullback could extend further towards the next associated support around 1.3960-1.3950 around the November 25th low, 1.3925.
On the contrary, the 1.4200 mark may continue to act as a barrier for the time being, beyond which the USD/CAD pair could cross the intermediate hurdle around the 1.4260 area and test the April 2020 price range highs around 1.4300. There is. The spot price may eventually rise to around 1.4335-1.4340.
USD/CAD daily chart
economic indicators
Central bank interest rate decisions
of bank of canada (BoC) announces interest rate decisions at the end of its eight scheduled meetings per year. If the BoC determines that inflation is above target (hawkish), it will raise interest rates to reduce inflation. This is bullish for the Canadian dollar, as higher interest rates will increase foreign capital inflows. Similarly, if the central bank determines that inflation is below target (dovish), it will lower interest rates to give Canada's economy hope that inflation will pick up again. This is bearish for the Canadian dollar as it inhibits foreign capital flows into Canada.
Next release: Wednesday, December 11, 2024 14:45
frequency: irregular
consensus: 3.25%
Previous: 3.75%
sauce: bank of canada
