USD/CAD technology outlook:
- of Canadian Dollar greatly strengthened against USD From late May
- Bank of Canada’s hawkish stance could strengthen recent currency moves
- USD/CAD Rates could fall if the Fed sticks to its scenario and doesn’t surprise markets
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The Canadian dollar has risen sharply against the US dollar since late May. The chart below shows how USD/CAD has fallen more than 2.0% over the past two weeks, currently trading near C$1.3350 and steadily approaching its 2023 lows.
The Bank of Canada’s surprising decision to raise rates at its June meeting after pausing its January rate hike campaign strengthens recent exchange rate movements and is another positive for Looney. .
The central bank’s aggressive stance will likely continue in the short term, especially if traders increase bets on further tightening in the wake of the central bank’s view that “monetary policy is not restrictive enough” to bring inflation down to 2.0%. may continue to put downward pressure on USD/CAD. the goal.
Related: Canadian dollar break looms after BOC rate hike: USD/CAD, EUR/CAD, GBP/CAD pricing
But the positive outlook for the Canadian dollar depends on one important factor. That is, the Fed needs to stick to next week’s scenario in line with Chairman Powell’s guidance and keep borrowing costs stable. If banks deviate from their telegrammed policy, interest rate expectations could quickly turn hawkish and cause the US dollar to appreciate.
The FOMC doesn’t like to surprise markets, but economic conditions may force policymakers to make the mistake of tightening. One of the upcoming reports that could turn the tide in favor of another rate hike is the May consumer price index survey, due out Tuesday.
Consensus estimates show that the annual headline CPI fell to 4.1% from 4.9%, while the core index fell to 5.3% from 5.5% the previous month. If inflation performance significantly outperforms these expectations and shows resilience, the Fed could take an unwavering stance by raising rates by another 25 basis points and even forecasting a higher peak rate. This will be a bullish result for USD/CAD.
|
change |
long |
shorts |
OI |
| every day | 6% | -6% | 2% |
| every week | 57% | -Four% | 33% |
USD/CADTechnical Chart
USD/CAD has formed a double top in recent months. This is a bearish technical formation consisting of two similar peaks separated by an intermediate trough as shown in the daily chart below.
This pattern is confirmed when the underlying price completes the ‘M’ shape and breaks through the support level formed by the neckline, the line underlying the double top. For USD/CAD, the important lower bound to watch is 1.3300.
USD/CAD could plummet if a double top is confirmed, but it could take time for this scenario to materialize. In any case, the size of the potential downward slump can be obtained by vertically projecting the height of the pattern from the breakpoint. For this pair, this could mean a rally to 1.2960.
