The Current State of USD/CAD: What Investors Need to Know
As the USD/CAD pair aims to break above the key resistance level of 1.3800, investors are closely watching the developments in the market. Here’s a breakdown of the factors influencing the movement of this currency pair:
BoC Expected to Cut Interest Rates
- The Bank of Canada (BoC) is anticipated to announce a substantial interest rate cut of 50 basis points (bps) in its upcoming monetary policy meeting.
- The Canadian economy requires additional stimulus to boost overall demand and job growth.
- Sliding price pressures and weak labor growth have fueled expectations of a larger rate cut by the BoC.
USD’s Upside Momentum Pauses
- The US Dollar has seen an eight-day winning streak come to a halt as investors seek clarity on the Federal Reserve’s interest rate plans.
- Market participants are currently anticipating further interest rate cuts by the Fed in November and December.
Technical Analysis:
- The USD/CAD pair showed strong buying interest after forming a Double Bottom near 1.3440, signaling a bullish trend.
- The 20- and 50-day Exponential Moving Averages (EMAs) have crossed bullishly near 1.3600, indicating a positive outlook.
- The 14-day Relative Strength Index (RSI) is in the bullish range, suggesting active momentum in the market.
Future Outlook
If the pair successfully breaks above the resistance level of 1.3800, it could target highs of 1.3846 and 1.3945. However, a downside move below 1.3650 may lead to a test of support levels near 1.3600 and 1.3538.
Analysis of BoC Interest Rate Decision
The Bank of Canada (BoC) plays a crucial role in shaping the Canadian economy through its interest rate decisions. By adjusting rates based on inflation expectations, the BoC influences the flow of foreign capital into the country.
The upcoming interest rate decision on Wed, Oct 23, 2024, is anticipated to be a key event that could impact the CAD’s performance in the forex market.