The USDCAD currency pair lost more than 60 standard points yesterday. This trend was due to expected interest rate cuts by the U.S. Federal Reserve (Fed) in the first half of 2024.
On Wednesday, the dollar index dropped to a more than 3-month low of 102.37. Major currencies received support as the dollar fell.
Member of the Fed’s Board of Governors Christopher Waller pointed to the possibility of a pivot in the country's monetary policy in the coming months. At the same time, the policymaker reinforced the market's expectations that the regulator has reached a peak in interest rates this year.
According to Kyle Rodda, analyst at Capital.com, the dovish stance of the Fed's officials traditionally signals its further shift to policy easing. At the moment, the probability of a rate cut next March is 40%. This is indicated by the CME FedWatch Tool.
According to Wells Fargo forecasts, progress in the fight against inflation in the States allows to talk about earlier monetary policy easing than experts assumed. Subsequently, there may be an even greater weakening of the country's national currency, despite the resilience of the U.S. economy.
Investors will be closely watching the U.S. Personal Consumption Expenditures (PCE) data on Thursday. This indicator is the Fed's preferred inflation gauge. The release of revised U.S. GDP data for the third quarter, due on Wednesday, is also in focus.
Canada will likewise release GDP data on Thursday. According to the expectations of Canada's national statistical agency, the monthly gross product should remain at 0%. Confirmation of the given data may correct the Canadian dollar exchange rate.
USDCAD quotes are forming a downtrend on the H4 timeframe.
In terms of wave analysis, the price is forming the third downward wave. Breaking through the top of the first wave at 1.3630 has already taken place. The downward movement may intensify in the near term.
The short-term outlook for the USDCAD pair suggests selling.
The target is at the level of 1.3400.
Part of the profit should be taken near the level of 1.3490.
A stop-loss could be placed at the level of 1.3670.
The bearish trend is short-term, so trade volume should not exceed 2% of your balance.