The USDCAD currency pair lost more than 120 standard points yesterday. This was due to the decline in the dollar after the publication of data on the slowdown in inflation in the United States. Low indicators bolstered bets that the Federal Reserve has reached the end of its monetary tightening cycle.
Increased volatility in the currency markets was due to the release of the consumer price index (CPI) in the US. As noted by the Ministry of Labor, over the past 12 months, its values have increased by only 3.2%. In September, this inflation indicator reached 3.7%.
Energy carriers last month fell in price by 4.5% in annualized terms (after a decline of 0.5% in September). Food prices increased by 3.3% (+3.7% in September), new cars — by 1.9% (+2.5%). Transportation services rose 9.2% (+9.1%).
The Fed closely monitors data on the growth rate of consumer prices in the US, which is one of the important factors in making decisions on monetary policy. The central bank's inflation target is 2%.
The published figures forced analysts to revise their forecasts for an interest rate hike by the US regulator. Tuesday's US interest rate contracts suggest a 65% chance of a rate cut next May. That's up from Monday's 34%, according to CME's FedWatch tool.
According to Karl Schamotta, chief market strategist at Corpay, the Canadian dollar rose sharply on improving interest rate differentials, borrowing costs and general risk appetite.
The USDCAD currency pair quotes have broken out of the uptrend on the H4 timeframe. The Bears Power indicator (standard values) is in the negative zone, which indicates the dominance of bearish positions.
According to the wave analysis, the price is forming the third descending wave. Breaking through the top of the first wave at 1.3630 will strengthen the downward price movement.
Signal:
The short-term outlook for the USDCAD pair is to sell.
The target is at the level of 1.3400.
Part of the profit should be fixed near the level of 1.3575.
A Stop-loss should be placed near the level of 1.3865.
The bearish trend is of a short-term nature, so it is suggested to limit the trading volume to no more than 2% of your capital.
This content is for informational purposes only and is not intended to be investing advice.
