US Dollar Forecast: USD/CAD Ascending Channel Remains Intact

US Dollar Outlook: USD/CAD

USD/CAD continues to trade within the ascending channel from earlier this year as it rebounds from the 50-Day SMA (1.3611), and the exchange rate may attempt to retrace the decline from the start of the month should it track the positive slope in the moving average.

US Dollar Forecast: USD/CAD Ascending Channel Remains Intact

USD/CAD no longer carves a series of lower highs and lows following the kneejerk reaction to the US Non-Farm Payrolls (NFP) report, and it remains to be seen if the Federal Reserve will respond to the slowdown in job growth as the central bank is ‘prepared to respond to an unexpected weakening in the labor market.’

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US Economic Calendar

FOREX.com Economic Calendar

In turn, fresh remarks from Fed officials may influence USD/CAD as the pledges to ‘make decisions meeting by meeting,’ and hints of a looming change in regime may produce headwinds for the Greenback as the Federal Open Market Committee (FOMC) lays out plans to reduce the cap on Treasury redemption ‘from the current $60 billion per month to $25 billion per month as of June 1.’

However, Fed officials may express dissenting views as the FOMC reiterates that ‘we do not expect it will be appropriate to reduce the target range for the federal funds rate until we have gained greater confidence that inflation is moving sustainably toward 2 percent,’ and USD/CAD may hold within the ascending channel ahead of Canada’s Employment report if the upcoming speeches curb speculation for an imminent rate-cut.

Canada Economic Calendar

At the same time, the upcoming update to Canada’s Employment report may also influence the near-term outlook for USD/CAD as the economy is projected to add 20.0K jobs in April, and a material rebound in the labor market may drag on USD/CAD as it raises the Bank of Canada’s (BoC) scope to retain a restrictive policy.

In contrast, a weaker-than-expected employment report may produce headwinds for the Canadian Dollar as it puts pressure on Governor Tiff Macklem and Co. to switch gears, and USD/CAD may retrace the decline from the monthly high (1.3784) as it attempts to hold above the above the former-resistance zone around the December high (1.3620).

With that said, USD/CAD may continue to bounce back from the 50-Day SMA (1.3611) as it snaps the series of lower highs and lows from last week, but the exchange rate may threaten the ascending channel from earlier this year if it no longer responds to the positive slope in the moving average.

USD/CAD Price Chart –Daily

Chart Prepared by David Song, Strategist; USD/CAD Price on TradingView

• USD/CAD attempts to hold above the above the former-resistance zone around the December high (1.3620) as it bounces back from the 50-Day SMA (1.3611), and the exchange rate may attempt to retrace the decline from the start of this month if it continues to track the ascending channel from earlier this year.
• Need a close back above 1.3700 (23.6% Fibonacci retracement) to bring the monthly high (1.3784) on the radar, with a break/close above 1.3810 (161.8% Fibonacci extension) raising the scope for a test of the April high (1.3846).
• Nevertheless, USD/CAD may threaten the ascending channel if it no longer responds to the positive slope in the moving average, with a break/close below the 1.3610 (38.2% Fibonacci retracement) to 1.3630 (38.2% Fibonacci retracement) region opening up 1.3540 (50% Fibonacci retracement).

Additional Market Outlooks

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US Dollar Forecast: GBP/USD Recovery Stalls Ahead of 50-Day SMA

--- Written by David Song, Strategist

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