Canada Dollar Forecast: USD/CAD Analysis
The USD/CAD currency pair has experienced a recent pullback from its new yearly peak of 1.4271. This correction has resulted in the Relative Strength Index (RSI) remaining below the overbought threshold. However, a decisive movement above the 70 mark for the RSI may correlate with a continued upward trajectory for the exchange rate, echoing earlier patterns observed this year.
Assessing the RSI Dynamics in USD/CAD
As the USD/CAD pair aims to revisit the April 2020 high of 1.4299, it is consistently establishing a rhythm of higher highs and lows. The exchange rate appears to be aligning with the positive trend established by the 50-Day Simple Moving Average (SMA), currently positioned at 1.3953, affirming its upward momentum.
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Canada’s Economic Outlook
In the coming days, the update to Canada’s Consumer Price Index (CPI) is expected to be stable at 2.0%. Despite this data, the USD/CAD pair may not see significant downward pressure, especially as the Bank of Canada (BoC) remains open to the possibility of lowering interest rates to stimulate growth while keeping inflation close to its target range of 1-3%.
This outlook suggests that USD/CAD could continue to gain traction leading up to the Federal Reserve’s interest rate decision on December 18. However, any unexpected bullish movements in CPI could bolster the Canadian Dollar if Governor Tiff Macklem and other officials indicate a wait-and-see approach regarding future rate adjustments.
If momentum fails to surpass the April 2020 high of 1.4299, USD/CAD may experience challenges in maintaining its upward trend. Nonetheless, should the RSI exceed the 70 mark, it may signal an increase in bullish momentum.
Technical Analysis: USD/CAD Price Chart
Chart prepared by David Song, Strategist; USD/CAD Price on TradingView
- USD/CAD is in an appreciating phase following a four-week rally, having reached a new annual high of 1.4271 while extending its bullish sequence from last week.
- A breakout above the April 2020 peak at 1.4299 could pave the way for reaching the 1.4480 level (100% Fibonacci extension), with further resistance anticipated around 1.4590 (161.8% Fibonacci extension).
- Conversely, if the market lacks momentum to overcome the April high, a correction could see the RSI retract from overbought levels, with the potential for a retracement towards the 1.4040 to 1.4080 zone (23.6% to 78.6% Fibonacci retracement and extension).
Further Market Insights
US Dollar Forecast: EUR/USD Attempts to Halt Five-Day Selloff
USD/JPY Stages Five-Day Rally for First Time Since June
Gold Price Forecast: Bullion Remains Below Pre-US Election Prices
GBP/USD Outlook Hinges on Break of December Opening Range
--- Analyzed by Financial Strategist
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