- Investors expect US interest rates to remain high.
- Most members of the Fed’s rate-setting committee still perceive “substantial upside risks to inflation.”
- New applications for US unemployment benefits fell.
The USD/CAD outlook is bullish today. The dollar has trended higher against its major rivals for the fifth consecutive week. It was the longest winning streak in 15 months.
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Notably, the rise was driven by expectations that US interest rates would remain elevated. Additionally, concerns over China’s economy have seen a shift toward safer assets. On Friday, however, the dollar narrowed those gains slightly.
Meanwhile, the Fed’s most recent meeting minutes were released on Thursday. They found that most members of the Interest Rate Setting Committee still perceive “significant upside risks to inflation”. This points to a trend towards further rate hikes.
Moreover, strong economic data, especially in retail sales, had already bolstered arguments for additional tightening measures.
These factors combined to push the 10-year Treasury yield to its highest level since October, reaching 4.328% on Thursday. “The market wants the Fed to pause, but the available data doesn’t support that sentiment,” said IG analyst Tony Sycamore.
“The US dollar has fully benefited from risk aversion, rising yields and resilience in economic data,” he said.
In addition, the US Department of Labor said the number of initial unemployment claims filed by Americans dropped last week. The decline suggests that the job market remains tight. As a result, the Fed’s efforts to implement policies that restrain economic growth may be extended.
Major USD/CAD Events Today
The currency pair is likely to consolidate as investors are waiting for important economic reports from the US and Canada.
USD/CAD Technical Outlook: Bullish Momentum Suggests Price Could Hit 1.3600 Soon.
USD/CAD is bullish on the chart, with the pair above the 30-SMA and the RSI above 50. The RSI has supported solid bullish momentum since it started trending above 50.
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At the same time, the price has repeatedly honored the 30-SMA as a support, rising each time it returns to that level. The price is currently trading at the closest support at 1.3500 and the closest resistance at 1.3600. Considering the bullish bias, the price could rise to 1.3600 soon.
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