The USDCAD currency pair strengthens slightly on Wednesday. Meanwhile, at today's Federal Reserve meeting, officials will determine the course of the regulator's further monetary policy.
James Kniveton, senior corporate currency dealer at Convera, said the central bank didn't say rates would be cut. The Fed is focused on economic indicators. The market is already waiting for the easing of monetary policy, Kniveton added.
However, inflation indicators make it less likely that the Fed will cut rates early next year. In November, the U.S. consumer prices unexpectedly increased on the back of the growth in the cost of rental housing, which exceeded the decline in petrol prices. At the same time, economists polled by Reuters predicted that prices would remain at the level of the previous month.
The U.S. Labor Department's Bureau of Labor Statistics reported that the consumer price index (CPI) edged up 0.1% last month from October's 0% level.
In addition, the data released on Tuesday showed prices for used cars, health care and vehicle insurance rose.
The release of new inflation statistics followed the release of data that showed job growth accelerated in November and the unemployment rate fell to 3.7 % from a nearly 2-year high of 3.9 % in October.
Reuters also reports on the Bank of Canada's difficult situation in fighting inflation due to the recent drop in long-term borrowing costs. This could delay interest rate cuts if it leads to renewed activity in the housing market. Bond yields, as well as stock market conditions and credit spreads, affect overall financial conditions, including the availability and cost of credit for households and businesses. Central banks, including the Canadian central bank, use changes in these economic indicators to implement their monetary policies.
The USDCAD currency pair quotes demonstrate the formation of a downward trend on the H4 time interval.
From the point of view of wave analysis, the price is in the formation of a quadruple ascending wave. Relative Strength Index (RSI) indicator (standard values) predicts a change in the direction of the rate movement and transition to the fifth downward wave, which is reflected in the divergence.
The short-term outlook for USDCAD is to sell.
The target is at the level of 1.3360.
Part of the profit should be fixed near the level of 1.3480.
A Stop-loss should be placed at the level of 1.3680.
The bearish trend has a short-term character, so the trade volume should not be more than 2% of your balance.