US Dollar Forecast: USD/CAD Post-Fed Selloff Stalls Ahead of August Low
US Dollar Outlook: USD/CAD
USD/CAD appears to be reversing ahead of the August low (1.3184) as it halts a three-day selloff, and the Relative Strength Index (RSI) may show the bearish momentum abating should it cross above 30 to indicate a textbook buy signal.
US Dollar Forecast: USD/CAD Post-Fed Selloff Stalls Ahead of August Low
USD/CAD cleared the September low (1.3380) as the Federal Reserve plans to unwind the restrictive policy in 2024, and the Greenback may face headwinds over the remainder of the year as Chairman Jerome Powell and Co. ‘do not view it as likely to be appropriate to raise interest rates further.’
CME FedWatch Tool
Source: CME
As a result, the CME FedWatch Tool now reflects a greater than 90% probability for a Fed rate-cut in May 2024, and expectations for lower US interest rates may keep USD/CAD under pressure as the Bank of Canada (BoC) ‘remains prepared to raise the policy rate further if needed.’
Join David Song for the Weekly Fundamental Market Outlook webinar. David provides a market overview and takes questions in real-time. Register Here
Canada Economic Calendar
However, the update to Canada’s Consumer Price Index (CPI) may curb the recent decline USD/CAD as the report is anticipated to show the headline reading for inflation narrowing to 2.9% in November from 3.1% per annum the month prior.
Signs of easing price growth may keep the BoC on the sidelines as ‘data and indicators for the fourth quarter suggest the economy is no longer in excess demand,’ but a higher-than-expected CPI print may force Governor Tiff Macklem and Co. to keep Canada interest rates higher for longer as ‘Governing Council wants to see further and sustained easing in core inflation.’
With that said, the breach of the September low (1.3380) may lead to a test of the August low (1.3184), but USD/CAD may attempt to retrace the decline from earlier this month as it no longer carves a series of lower highs and lows.
USD/CAD Price Chart –Daily
Chart Prepared by David Song, Strategist; USD/CAD Price on TradingView
- USD/CAD holds near the monthly low (1.3350) after failing to defend the opening range for December, with a break/close below the 1.3230 (100% Fibonacci extension) to 1.3310 (50% Fibonacci retracement) raising the scope for a test of the August low (1.3184).
- However, the rebound from the monthly low (1.3350) may gather pace as USD/CAD no longer carves a series of lower highs and lows, and the Relative Strength Index (RSI) may show the bearish momentum abating should it recover from oversold territory.
- A move above 30 in the RSI may accompany a near-term rebound USD/CAD liked the price action from earlier this year, with a break/close above 1.3440 (23.6% Fibonacci retracement) bringing the monthly high (1.3620) on the radar.
Additional Market Outlooks
US Dollar Forecast: GBP/USD Pulls Back from Channel Resistance
US Dollar Forecast: AUD/USD Post-RBA Weakness Persists Ahead of Fed
--- 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 2025