USD/CAD Post-BoC Rise Pushes RSI Towards Overbought Zone

Canadian Dollar Outlook: USD/CAD

USD/CAD registers a fresh monthly high (1.3677) as the Bank of Canada (BoC) keeps the benchmark interest rate at 5.00%, and another move above 70 in the Relative Strength Index (RSI) is likely to be accompanied by a further advance in the exchange rate like the price action from last month.

USD/CAD Post-BoC Rise Pushes RSI Towards Overbought Zone

The opening range for September remains in focus as USD/CAD extends the advance from the start of the month, and the exchange rate may attempt to retrace the decline from the yearly high (1.3862) as the BoC acknowledges that the ‘Canadian economy has entered a period of weaker growth, which is needed to relieve price pressures.’

It seems as though the BoC is taking another pause from its hiking-cycle as central bank ‘is prepared to increase the policy interest rate further if needed,’ but Canada’s Employment report may put pressure on Governor Tiff Macklem and Co. to pursue a more restrictive policy as the update is anticipated to show a rebound in job growth.

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Canada Economic Calendar

FOREX.com Economic Calendar

Canada is expected to add 15.0K jobs in August following the 6.4K contraction the month prior, and a positive development may generate a bullish reaction in the Canadian Dollar as it fuels speculation for a BoC rate-hike later this year.

However, another unexpected decline in Canada employment may keep USD/CAD afloat as it encourages the BoC to conclude its hiking-cycle, and the exchange rate may attempt to retrace the decline from the yearly high (1.3862) as it extends the series of higher highs and lows from earlier this week.

With that said, the opening range for September is in focus as USD/CAD registers a fresh monthly high (1.3677), and another move above 70 in the Relative Strength Index (RSI) is likely to be accompanied by a further advance in the exchange rate like the price action from last month.

USD/CAD Price Chart –Daily

Chart Prepared by David Song, Strategist; USD/CAD Price on TradingView

USD/CAD clears the April high (1.3668) as it extends the advance from the start of the month, with the exchange rate registering a fresh monthly high (1.3677) as it carves a series of higher highs and lows.
Another move above 70 in the Relative Strength Index (RSI) is likely to be accompanied by a further advance in USD/CAD like the price action from last month, with a move above 1.3820 (161.8% Fibonacci extension) raising the scope for a test of the yearly high (1.3862).
Next area of interest comes in around the 2022 high (1.3978), but the RSI may show the bullish momentum abating if it struggles to push above 70 and diverges with price.
Need a move below 1.3630 (38.2% Fibonacci retracement) for USD/CAD to threaten the bullish price series from earlier this week, with a breach of the monthly low (1.3489) bringing the 1.3440 (23.6% Fibonacci retracement) area back on the radar.

Additional Market Outlooks

AUD/USD Forecast: RSI Susceptible to Another Oversold Reading

EUR/USD Post-NFP Weakness Brings Test of August Low

--- Written by David Song, Strategist

Follow on Twitter at @DavidJSong

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