USDCAD growth is limited by technical components

17 January 2024 91
USDCAD growth is limited by technical components

The USDCAD currency pair shows growth on Wednesday as the U.S. dollar strengthened after tough remarks from a U.S. Federal Reserve (Fed) official. These eased expectations of an interest rate cut in March. At the same time, traders expect new comments from other Fed officials this week.


The dollar index reached a one-month high against a basket of major currencies. The speech of Christopher Waller, a member of the U.S. Federal Reserve Board of Governors, dampened market participants' expectations for a March rate cut.


According to Christopher Waller, the Fed should not rush to ease monetary policy until the decline in inflation is sustainable.


According to CME's FedWatch Tool, traders' expectations of an interest rate cut in March fell to 62.2% from 76.9% in the prior session.

Today and tomorrow, market participants wait for the speeches of Fed officials Michelle Bowman and Raphael Bostic.


Meanwhile, Canada's inflation data released on Tuesday eased expectations of an interest rate cut in the country soon.


Canada's annual inflation rate rose to 3.4% in December from 3.1% in November. This increase indicates the sustainability of inflationary pressures.


According to a Reuters poll, the country's central bank will keep its benchmark rate at 5% next week, which is a 22-year-high. Following the release of the latest data, markets are pricing in a one-in-three chance that the central bank will start cutting rates in March, down significantly from the previous estimate of nearly 50%.


The USDCAD currency pair quotes demonstrate the formation of an upward correction corridor on the H4 timeframe. Most fundamental factors point to the growth of the financial instrument. However, a technical resistance of the ascending channel may prevent further growth. The indicator Stochastic Oscillator (standard values) indicates that the curve is approaching the overbought zone. The pair price, having rolled back from the trend resistance, may resume the decline within the correctional corridor.


Signal:

The short-term outlook for USDCAD is to sell.

The target is at the level of 1.3430.

Part of the profit should be fixed near the level of 1.3475.

A Stop-loss should be placed at the level of 1.3570.

 

The bearish trend has a short-term character, so the trade volume should not be more than 2% of your balance.

This content is for informational purposes only and is not intended to be investing advice.

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