US Dollar Forecast: USD/CAD Pulls Back Ahead of December High

US Dollar Outlook: USD/CAD

USD/CAD extends the decline from the start of the week amid the failed attempt to test the December high (1.3620), but the exchange rate may track the positive slope in the 50-Day SMA (1.3502) if it continues to hold above the moving average.

US Dollar Forecast: USD/CAD Pulls Back Ahead of December High

USD/CAD is back under pressure after retracing the decline following the Federal Reserve interest rate decision, and the exchange rate may continue to pull back from the monthly high (1.3614) as it initiates a series of lower highs and lows.

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In turn, USD/CAD may face a further decline over the remainder of the week on the back of US Dollar weakness, but developments coming out of the US may sway the exchange rate as the Federal Open Market Committee (FOMC) endorses a data dependent approach in managing monetary policy.

US Economic Calendar

FOREX.com Economic Calendar

The update to the Personal Consumption Expenditure (PCE) Price Index, the Fed’s preferred gauge for inflation, may force Chairman Jerome Powell and Co. to keep US interest rates higher for longer as both the headline and core rate are projected to hold steady in February.

Signs of sticky inflation may generate a bullish reaction in the Greenback as it limits the Fed’s scope to unwind its restrictive policy, but an unexpected downtick in the PCE index may keep USD/CAD under pressure as it encourages the Federal Open Market Committee (FOMC) to deliver a rate cut sooner rather than later.

With that said, USD/CAD may face a further decline over the remainder of the month as it initiates a series of lower highs and lows, but the exchange rate may stage further attempts to test the December high (1.3620) should it track the positive slope in the 50-Day SMA (1.3502).

USD/CAD Price Chart –Daily

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

• USD/CAD appeared to be on track to test the December high (1.3620) after clearing the February high (1.3606), but the exchange rate may track the monthly range as it continues to hold below 1.3630 (38.2% Fibonacci retracement).
• The recent series of lower highs and lows may push USD/CAD towards the 50-Day SMA (1.3502), with a breach below 1.3440 (23.6% Fibonacci retracement) bringing the monthly low (1.3420) on the radar.
• However, USD/CAD may stage further attempts to test the December high (1.3620) should it track the positive slope in the moving average, with a break/close above 1.3630 (38.2% Fibonacci retracement) opening up 1.3810 (161.8% Fibonacci extension).

Additional Market Outlooks

US Dollar Forecast: USD/JPY Struggles to Test November High

GBP/USD Forecast: Pound Susceptible to Test of Monthly Low After BoE

--- Written by David Song, Strategist

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