USDCAD is projected to reverse trend and fall to 1.42155

At the moment the USDCAD currency pair is trading in a narrow range around 1.44000, which is due to the reduced trading activity during the New Year holidays. 

The US dollar remains strong amid expectations of a slowdown in rate cuts by the Federal Reserve (Fed) compared to other central banks. Previously released US Personal Consumption Expenditure (PCE) price index data showed a moderate growth in inflation remaining above the Fed's 2% target, which, together with the quarter-point rate cut in December, makes the possibility of more aggressive monetary easing unlikely. Meanwhile, low US Treasury bond yields are restraining the dollar. 

In Canada, the economic outlook remains weak and the Bank of Canada is likely to continue cutting rates to stimulate economic growth. Despite aggressive rate cuts in the past, the Bank of Canada governor has announced a “more gradual approach to monetary policy,” suggesting a slower pace of rate cuts. Political instability caused by the recent resignation of the finance minister and the possibility of a vote of no confidence in the Prime Minister is also causing uncertainty in the Canadian market. While the CFIB Canadian Business Barometer Index showed an improvement in November, the figures are expected to decline in December.

In the future, important factors affecting the USDCAD pair will be the January US employment data, as well as the inauguration of Donald Trump, whose decrees could have a strong impact on the markets, including currency markets. Thus, because of future trade duties, one can expect a decrease in economic interaction between the U.S. and other countries. This could lead to a decrease in demand for the dollar, as reduced trade could have a negative impact on economic growth and therefore the currency.

On the technical side, the RSI, remaining mostly above 60, indicates that the market is generally in a bullish zone, with overbought potential. The Chaikin Oscillator, after a strong increase in buying pressure, began to decline at the end of the period. The Chaikin Oscillator along with the RSI suggest that the market may be reaching the end of its current trend, when buying pressure begins to decrease and the market may begin to oscillate and reverse.

Traders might consider the following strategy:

Sell USDCAD at the current price. Take profit – 1.42155. Stop loss – 1.44655.