Canada Dollar Outlook: USD/CAD
The USD/CAD currency pair has recently experienced a pullback ahead of its November peak of 1.4178, which comes after successfully clearing the opening range for December. The upcoming Bank of Canada (BoC) meeting poses potential challenges for the Canadian Dollar, as market expectations lean towards another interest rate reduction by the central bank.
USD/CAD Forecast: Canadian Dollar Faces Pressure from Possible BoC Rate Cut
Following the Employment report from Canada, which indicated an increase in the unemployment rate to 6.8% in November from 6.5% in October, USD/CAD has retraced some of its recent gains. This correction keeps the Relative Strength Index (RSI) under the 70 threshold.
The RSI's movement suggests that bullish momentum is diminishing, as the oscillator appears to be reversing before entering overbought territory. However, the outcome of the forthcoming BoC meeting could alter the trajectory of USD/CAD, with central bank officials hinting at the likelihood of further policy rate cuts.
Canada Economic Calendar
The BoC is expected to lower its benchmark interest rate from 3.75% to 3.25%. This anticipated 50 basis point cut, coupled with a dovish outlook, may weigh heavily on the Canadian Dollar, as Governor Tiff Macklem and the central bank appear to be open to further reductions in interest rates into 2025.
Therefore, if the BoC maintains its current stance, it could mitigate the recent pullback in USD/CAD. Conversely, a shift in the BoC's forward guidance could trigger a bullish response in the Canadian Dollar, indicating that the central bank might be nearing the culmination of its rate-cutting cycle.
USD/CAD Price Chart – Daily
Chart Prepared by Senior Strategist
- USD/CAD may remain within a range as it experiences a pullback ahead of the November high (1.4178). A decline beneath the 1.4040 (23.6% Fibonacci retracement) to 1.4080 (78.6% Fibonacci extension) range could set the stage for a move towards the 1.3970 (61.8% Fibonacci extension) to 1.4000 (61.8% Fibonacci extension) area.
- A drop below 1.3900 (50% Fibonacci extension) would bring the November low of 1.3821 into focus. Nonetheless, USD/CAD may align with the upward trend indicated by the 50-Day SMA (1.3886) if it defends the December low at 1.4090.
- A breakthrough above the November high (1.4178) could reintroduce 1.4210 (78.6% Fibonacci extension) as a target, followed by interest around the April 2020 high of 1.4299.
Additional Market Outlooks
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Gold Price Outlook Complicated by Flattening 50-Day SMA Trends
EUR/USD Struggles to Reclaim Former Support Zone
