US Dollar Forecast: USD/CAD Trades in Ascending Channel with Fed on Tap
US Dollar Outlook: USD/CAD
USD/CAD holds above the former-resistance zone around the December high (1.3620) ahead of the Federal Reserve interest rate decision, and the exchange rate may continue to trade within an ascending channel should it tracks the positive slope in the 50-Day SMA (1.3590).
US Dollar Forecast: USD/CAD Trades in Ascending Channel with Fed on Tap
USD/CAD appears to be stuck in a narrow range following the kneejerk reaction to the US Personal Consumption Expenditure (PCE) Price Index, and the exchange rate may continue to trade sideways as signs of persistent inflation limits the Federal Open Market Committee’s (FOMC) scope to pursue a less restrictive policy in 2024.
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US Economic Calendar
In turn, the FOMC may further combat inflation by pledging to keep US interest rates higher for longer, and waning expectations for a change in regime may produce a bullish reaction in the Greenback as the ‘Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably down toward 2 percent.’
However, the Fed may continue to prepare US households and businesses for a less restrictive policy as Chairman Jerome Powell and Co. start to discuss ‘issues related to slowing the pace of decline in our securities holdings,’ and USD/CAD may threaten the ascending channel formation from earlier this year if the FOMC shows a greater willingness to tolerate above-target inflation.
With that said, USD/CAD may continue to give back the advance from the monthly low (1.3478) if it struggles to hold above channel support, but the exchange rate may exhibit a bullish trend should it continue to track the positive slope in the 50-Day SMA (1.3590).
USD/CAD Price Chart –Daily
Chart Prepared by David Song, Strategist; USD/CAD Price on TradingView
- USD/CAD may continue to trade within the ascending channel from earlier this year as it holds above the former-resistance zone around the December high (1.3620), and the exchange rate may retrace the decline from the monthly high (1.3846) should it track the positive slope in the 50-Day SMA (1.3590).
- A move back above 1.3700 (23.6% Fibonacci retracement) may push USD/CAD towards 1.3810 (161.8% Fibonacci extension), with a breach above the monthly high (1.3846) bringing the November high (1.3899) back on the radar.
- However, failure to hold above the 1.3610 (38.2% Fibonacci retracement) to 1.3630 (38.2% Fibonacci retracement) region may lead to a test of channel support, with a break/close below 1.3540 (50% Fibonacci retracement) bringing the monthly low (1.3478) on the radar.
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--- Written by David Song, Strategist
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