US Dollar Outlook: USD/CAD
USD/CAD may attempt to trade back above the 50-Day SMA (1.3496) as it clears the recent series of lower highs and lows, and the Bank of Canada (BoC) interest rate decision may fuel the recent rise in the exchange rate should the central bank adjust the forward guidance for monetary policy.
Canadian Dollar Forecast: USD/CAD Faces Bank of Canada (BoC) Meeting
USD/CAD may retrace the decline from the monthly high (1.3542) as it extends the advance from the start of the week, but another failed attempt to close above the moving average may keep the exchange rate within the January range as the indicator continues to reflect a negative slope.
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Nevertheless, the BoC meeting may sway USD/CAD as the central bank is slated to release its updated forecasts, and a hawkish forward guidance from Governor Tiff Macklem and Co. may generate a bullish reaction in the Canadian Dollar as the Governing Council ‘remains prepared to raise the policy rate further if needed.’
Canada Economic Calendar
However, the BoC may prepare Canadian households and businesses for a change in regime as the ‘slowdown in the economy is reducing inflationary pressures in a broadening range of goods and services prices,’ and the Canadian Dollar may face headwinds should the Governing Council show a greater willingness to reduce interest rates in 2024.
In turn, the BoC meeting may influence USD/CAD ahead of the Federal Reserve rate decision on January 31 as both central banks appear to be at the end of their hiking-cycle, and it remains to be seen if USD/CAD will track the negative slope in the 50-Day SMA (1.3489) amid the failed attempts to close above the moving average.
With that said, USD/CAD may consolidate within the January range as it appears to be reversing ahead of the December high (1.3620), but the exchange rate may attempt to retrace the decline from the start of the month as it clears the recent series of lower highs and lows.
USD/CAD Price Chart –Daily
Chart Prepared by David Song, Strategist; USD/CAD Price on TradingView
- USD/CAD may retrace the decline from the monthly high (1.3542) as it snaps the recent series of lower highs and lows, with a breach above the December high (1.3620) opening up 1.3630 (38.2% Fibonacci retracement).
- Next area of interest comes in around 1.3810 (161.8% Fibonacci extension), but USD/CAD may track the negative slope in the 50-Day SMA (1.3489) amid the failed attempts to close above the moving average.
- USD/CAD may hold within the monthly range, with a break/close below 1.3440 (23.6% Fibonacci retracement) 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).
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--- Written by David Song, Strategist
Follow on Twitter at @DavidJSong
