US Dollar Forecast: USD/CAD Fails to Test Monthly High Ahead of Fed
US Dollar Outlook: USD/CAD
USD/CAD consolidates following the failed attempt to test the monthly high (1.3542), but the Federal Reserve interest rate decision may influence the near-term outlook for the exchange rate as the central bank appears to be on track to switch gears over the coming months.
US Dollar Forecast: USD/CAD Fails to Test Monthly High Ahead of Fed
USD/CAD seems to be stuck in a narrow range as it struggles to retain the advance following the Bank of Canada (BoC) meeting, but the exchange rate may stage further attempts to track back above the 50-Day SMA (1.3468) after closing above the moving average during the previous week.
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Looking ahead, it remains to be seen if the Federal Open Market Committee (FOMC) will strike a similar tone to its Canadian counterpart as Governor Tiff Macklem and Co. expect ‘inflation to remain close to 3% during the first half of this year before gradually easing, returning to the 2% target in 2025,’ and the larger-than-expected slowdown in the US Personal Consumption Expenditure (PCE) Price Index may encourage the Fed to further adjust the forward guidance for monetary policy as ‘participants viewed the policy rate as likely at or near its peak for this tightening cycle.’
US Economic Calendar
In turn, hints of a looming change in regime may drag on the Greenback as Fed officials forecast lower US interest rates in 2024, but the FOMC’s first meeting for 2024 may generate a bullish reaction in the US Dollar should Chairman Jerome Powell and Co. show a greater willingness to keep US interest rates higher for longer.
With that said, the Fed rate decision may sway USD/CAD as the central bank seems to be on track to unwind its restrictive policy, but the exchange rate may stage further attempts to track back above the 50-Day SMA (1.3468) after closing above the moving average during the previous week.
USD/CAD Price Chart –Daily
Chart Prepared by David Song, Strategist; USD/CAD Price on TradingView
- USD/CAD weakens for the third consecutive day after failing to test the monthly high (1.3542), with a breach below last week’s low (1.3414) raising the scope for a move towards the 1.3230 (100% Fibonacci extension) to 1.3310 (50% Fibonacci retracement) region, which coincides with the January low (1.3229).
- Next area of interest comes in around the December low (1.3177), but USD/CAD may stage further attempts to trade back above the 50-Day SMA (1.3468) after closing above the moving average during the previous week.
- A breach above the monthly high (1.3542) brings the December high (1.3620) on the radar, with a break/close above 1.3630 (38.2% Fibonacci retracement) opening up 1.3810 (161.8% Fibonacci extension).
Additional Market Outlooks
US Dollar Forecast: GBP/USD Steady Ahead of Fed Rate Decision
EUR/USD Post-ECB Decline Vulnerable to Test of December Low
--- Written by David Song, Strategist
Follow on Twitter at @DavidJSong
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