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Trends & Analysis
News

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News

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CAD falls versus USD following inflation data

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Crude oil surges amid stalled US-Iran peace talks

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Asset Watch

Will the USD/CAD change course?

Tuesday, April 18, 2023

While fears of a banking crisis had investors pricing in rate cuts soon, economic stabilisation has reversed some of those dovish expectations. On Apr. 14, the Atlanta Fed also revealed that it expects 2.5% real GDP growth in Q1 2023 and noted on Apr. 13 that its Wage Growth Tracker rose from 6.1% in February to 6.4% in March.
With interest rates moving higher again, could the USD/CAD follow suit?
Now, a more hawkish Fed is bullish because FX pairs often trade off relative interest rates and/or relative rate-hike expectations. So if the Fed can out-hawk the Bank of Canada (BoC) – which has already paused rate hikes – the greenback can be a relative winner.

Even though the USD/CAD ended the Apr. 14 session below its 200-day moving average, it bounced near its 50-week MA. And with the latter acting as weekly support since 2022, further strength near 1.33 is a bullish sign.

On top of that, the USD/CAD’s 38.2% Fibonacci retracement level (1.3227) acted as resistance in July and August 2022, was support in November 2022, and, to a lesser degree, was also support in January 2023. Therefore, another line of defence is present if the currency pair breaks below the 50-week MA.

So, does the USD/CAD have the fuel to ignite a bullish fire, or will its neighbour to the north win the FX battle over the next few months?


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