US Dollar Forecast: USD/CAD Post-CPI Drop Threatens Ascending Channel
US Dollar Outlook: USD/CAD
USD/CAD fails to defend the opening range for May as the update to the US Consumer Price Index (CPI) reveals slowing inflation, but the exchange rate may track the ascending channel from earlier this year if it struggles to close below the 50-Day SMA (1.3627).
US Dollar Forecast: USD/CAD Post-CPI Drop Threatens Ascending Channel
USD/CAD registers a fresh monthly low (1.3591) as the US CPI narrows to 3.4% in April from 3.5% the month prior, while the Retail Sales report shows household spending holding flat during the same period amid forecasts for a 0.4% rise.
Join David Song for the Weekly Fundamental Market Outlook webinar. David provides a market overview and takes questions in real-time. Register Here
Developments coming out of the US may continue to sway USD/CAD as the Federal Reserve promotes a data-dependent approach in managing monetary policy, and it remains to be seen if the central bank will respond to the slowdown in consumer price growth as Chairman Jerome Powell and Co. ‘do not expect that 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.’
US Economic Calendar
In turn, the upcoming speeches from Fed officials may sway USD/CAD as the Federal Open Market Committee (FOMC) plans to ‘make decisions meeting by meeting,’ and the US Dollar may appreciate against its Canadian counterpart should the monetary authorities show a greater willingness to keep US interest rates higher for longer.
However, Fed officials may prepare US households and businesses for a less restrictive policy as the central bank prepares to ‘slow the pace of decline in our securities holdings,’ and a slew of dovish remarks may produce headwind for the Greenback amid expectations for lower US interest rates.
With that said, USD/CAD may continue to give back the advance from the April low (1.3478) as it struggles to hold above the former-resistance zone around the December high (1.3620), but the exchange rate may track the ascending channel from earlier this year if it fails to close below the 50-Day SMA (1.3627).
USD/CAD Price Chart –Daily
Chart Prepared by David Song, Strategist; USD/CAD Price on TradingView
- USD/CAD threatens the ascending channel from earlier this year as it fails to defend the opening range for May, with the recent weakness in the exchange rate pushing the Relative Strength Index (RSI) to its lowest level since January.
- A close below the 1.3610 (38.2% Fibonacci retracement) to 1.3630 (38.2% Fibonacci retracement) region raises the scope for a move towards 1.3540 (50% Fibonacci retracement), with the next area of interest comes in around the April low (1.3478).
- However, lack of momentum to close below the 50-Day SMA (1.3627) may keep USD/CAD within the ascending channel, with a break/close above 1.3700 (23.6% Fibonacci retracement) bringing the monthly high (1.3784) on the radar.
Additional Market Outlooks
US Dollar Forecast: USD/JPY Extends Rebound from 50-Day SMA
US Dollar Forecast: GBP/USD Eyes 50-Day SMA Ahead of US CPI
--- Written by David Song, Strategist
Follow on Twitter at @DavidJSong
The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.
FOREX.com is a registered FCM and RFED with the CFTC and member of the National Futures Association (NFA # 0339826). Forex trading involves significant risk of loss and is not suitable for all investors. Full Disclosures and Risk Warning. Increased leverage increases risk.
GAIN Capital Group LLC (dba FOREX.com) 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA. GAIN Capital Group LLC is a wholly-owned subsidiary of StoneX Group Inc.
© FOREX.COM 2024