USDCAD consolidation may be interrupted by fundamental factors

The USDCAD currency pair rate stabilized this week as investors awaited the publication of the U.S. Personal Consumption Expenditures Price Index. This indicator may become a key signal for determining the direction of the Federal Reserve System (Fed) monetary policy.

Fed spokeswoman Michelle Bowman on Tuesday reiterated the U.S. central bank's patient stance on easing policy. She said it is necessary to be cautious about cutting rates, given the existing risks of rising inflation. At least nine other Fed officials will share their views this week.

According to LSEG's IRPR app, traders estimate the probability of monetary policy easing in the U.S. at 61%, assuming the first quarter percentage point cut as early as June.

Markets are eagerly awaiting the release of the Consumer Expenditures Price Index, the Fed's preferred inflation measure. It is scheduled for release on Thursday. Anticipation of the index publication plays a key role in shaping the short-term dynamics of the U.S. dollar exchange rate.

Meanwhile, the chief economist at Desjardins Group Jimmy Jean notes that the time has come to soften the aggressive monetary policy of the Bank of Canada because of its "harmful" impact. According to the expert, the central bank will consistently reduce rates by 25 basis points at each meeting during 2024 and 2025. This will lead to a halving of interest rates by the end of 2025, reaching a level of 2.5% compared to the current 5%, Jin noted.

USDCAD currency pair quotes are forming a new uptrend on the D1 timeframe.

In terms of wave analysis, the price is in the process of forming the third ascending wave on the H6 timeframe. The break through the top of the first wave at 1.3540 has already taken place. The upward movement may intensify in the near term.

Signal:

Short-term prospects for USDCAD suggest buying. 

The target is at the level of 1.3840.

Part of the profit should be taken near the level of 1.3660.

A stop-loss could be placed at the level of 1.3350.

The bullish trend is short-term, so trade volume should not exceed 2% of your balance.