The USDCAD currency pair showed the greatest growth in almost a year as traders lowered expectations for the first interest rate cut by the Federal Reserve (Fed). Revision of traders' opinions was caused by unexpectedly high U.S. inflation data released last night.
According to James Knyveton, a currency dealer at Convera, the Fed's expectations for easing inflation data have not been met. According to LSEG's IRPR app, markets assume the probability of no rate cut in March and a rate cut in May below 50%. This is due to the U.S. consumer price index reading of 3.1% year-on-year in January. Economists' forecasts earlier estimated its value at 2.9%.
Meanwhile, the Canadian economy may face difficulties due to a slow move to cut interest rates, especially after consumers borrowed heavily during the pandemic.
The Bank of Canada emphasized that it is too early to consider cutting rates from the current 22-year high of 5%. The bank is concerned about high core inflation in the country. In turn, as stated by Canadian Finance Minister Chrystia Freeland, the priority of the country's next budget will be to create economic conditions that encourage lower interest rates.
The 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 H4 timeframe. The breakthrough of the top of the first wave at 1.3540 has already taken place. The upward movement may intensify in the near term.
Signal:
The short-term outlook for USDCUD is to buy.
The target is at the level of 1.3840.
Part of the profit should be fixed near the level of 1.3660.
A Stop-loss should be placed at the level of 1.3350.
The bullish 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.
