US Dollar Forecast: USD/CAD Continues to Bounce Along 50-Day SMA

US Dollar Outlook: USD/CAD

USD/CAD bounces along the 50-Day SMA (1.3441) as it struggles to retain the advance following the Federal Reserve interest rate decision, but the exchange rate may attempt to retrace the decline from the monthly high (1.3695) should it track the positive slope in the moving average.

US Dollar Forecast: USD/CAD Continues to Bounce Along 50-Day SMA

USD/CAD trades within the weekly range as it fails to extend the recent series of higher highs and low, and the exchange rate may consolidate over the remainder of the month amid expectations of seeing the Federal Open Market Committee (FOMC) keep US interest rates on hold.

Join David Song for the Weekly Fundamental Market Outlook webinar. David provides a market overview and takes questions in real-time. Register Here

CME FedWatch Tool

Source: CME

According to the CME FedWatch Tool, market participants are pricing a greater than 70% chance of seeing the Fed Funds rate unchanged at the next meeting in November, and speculation surrounding US monetary policy may continue to sway USD/CAD as Chairman Jerome Powell and Co. keep the door open to carry out a more restrictive policy.

US Economic Calendar

FOREX.com Economic Calendar

In turn, the update to the Personal Consumption Expenditure (PCE) Price Index, the Fed’s preferred gauge for inflation, may produce headwinds for the Greenback as the core reading is expected to narrow to 3.9% in August from 4.2% per annum the month prior, but a stronger-than-expected print may prop up USD/CAD as it puts pressure on the FOMC to further combat inflation.

With that said, USD/CAD may face range-bound conditions over the remainder of the month as it gives back the advance following the Fed rate decision, but the exchange rate may track the positive slope in the 50-Day SMA (1.3441) as it holds above the moving average.

USD/CAD Price Chart –Daily

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

• USD/CAD appears to be stuck in a defined range after registering a fresh monthly low (1.3380) earlier this week, but the exchange rate may attempt to track the positive slope in the 50-Day SMA (1.3441) as it holds above the moving average.
• The string of failed attempts to close below 1.3440 (23.6% Fibonacci retracement) may lead to a larger rebound in USD/CAD, with a move above 1.3630 (38.2% Fibonacci retracement) bringing the monthly high (1.3695) on the radar.
• However, failure to defend the monthly low (1.3380) may push USD/CAD towards the 1.3230 (100% Fibonacci extension) to 1.3310 (50% Fibonacci retracement) region, with the next area of interest coming in around the August low (1.3184).

Additional Market Outlooks

GBP/USD Falls After BoE Rate Decision to Push RSI Into Oversold Zone

AUD/USD Forecast: Fed Interest Rate Decision in Focus

--- Written by David Song, Strategist

Follow on Twitter at @DavidJSong