USDCAD is correcting due to potential changes in US and Canadian monetary policies

13 March 2024 86
USDCAD is correcting due to potential changes in US and Canadian monetary policies

The USDCAD currency pair stabilized on Wednesday after rising the day before. The growth was driven by the disappointing US inflation report, which weakened hopes for an interest rate cut by the Federal Reserve (Fed) in June.


US consumer prices rose significantly in February due to higher gasoline and housing costs. This indicates some resilience in inflation.

The Consumer Price Index rose by 0.4% last month. The year-on-year figure increased by 3.2%, slightly higher than 3.1% in January.


Against this backdrop, the timing of the Fed's first rate cut on June 11-12 meeting has been revised. Market participants now estimate the probability of such a move by the US central bank at 67% versus 71% earlier in the week, according to CME Group's FedWatch tool.


Traders' attention is now turning to other US economic data for the week. These include Retail Sales, the Producer Price Index and the Initial Jobless Claims report.


According to ForexLive chief currency analyst Adam Button, Canada is a major producer of commodities, including oil. Therefore, the Canadian dollar is usually quite sensitive to changes in the global economic outlook. In Button's opinion, the Canadian regulator should avoid significant policy divergence with the Fed.


Last Wednesday, the Bank of Canada put on hold the consideration of a rate cut, and left it at a 22-year high of 5%.


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


In terms of wave analysis, the price is forming the third ascending wave on the H6 timeframe. Breaking through the top of the first wave at 1.3540 has already taken place. However, an upward correction channel was formed after that. The upward movement may intensify when the price exits the local trend.


Signal:

The short-term outlook for the USDCAD pair suggests buying

The target is at the level of 1.3750.

Part of the profit should be taken near the level of 1.3600.

A Stop-loss could be set at the level of 1.3350.

 

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


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

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