USD/CAD Forecast: December Open Range in Focus with BoC on Tap

US Dollar Outlook: USD/CAD

USD/CAD trades to a fresh monthly low (1.3517) as Canada adds 24.9K jobs in November versus forecasts for a 15.0K print, and the opening range for December is in focus as the Bank of Canada (BoC) meets for its last interest rate decision for 2023.

USD/CAD Forecast: December Open Range in Focus with BoC on Tap

Keep in mind, USD/CAD cleared the October low (1.3562) after closing below the 50-Day SMA (1.3684) for the first time since August, and the exchange rate may continue to give back the advance from the September low (1.3380) as it no longer responds to the positive slope in the moving average.

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Canada Economic Calendar

FOREX.com Economic Calendar

However, the BoC meeting may produce headwinds for the Canadian Dollar as the central bank is expected to keep the benchmark interest rate at 5.00% for the third consecutive meeting, and an adjustment in the forward guidance for monetary policy may curb the recent decline in USD/CAD should Governor Tiff Macklem and Co. show a greater willingness to shift gears in 2024.

At the same time, the BoC may keep the door open to pursue a more restrictive policy as the Governing Council is ‘is prepared to raise the policy rate further if needed,’ and USD/CAD may dace a further decline over the days ahead if the central bank prepares Canadian households and businesses for higher interest rates.

With that said, the monthly opening range is in focus as USD/CAD extends the weakness from the start of November, and the exchange rate may continue to give back the advance from the September low (1.3380) as it no longer responds to the positive slope in the 50-Day SMA (1.3684).

USD/CAD Price Chart –Daily

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

• USD/CAD failed to defend the October low (1.3562) after closing below the 50-Day SMA (1.3684) for the first time since August, with a break/close below 1.3440 (23.6% Fibonacci retracement) raising the scope for a move towards the September low (1.3380).
• Will keep a close eye on the Relative Strength Index (RSI) as it approaches oversold territory, with a move below 30 likely to be accompanied by a further decline in USD/CAD like the price action from earlier this year.
• Next area of interest comes in around 1.3230 (100% Fibonacci extension) to 1.3310 (50% Fibonacci retracement), but failure to break/close below 1.3440 (23.6% Fibonacci retracement) may keep the RSI out of oversold territory.
• Need a move back above 1.3630 (38.2% Fibonacci retracement) to bring the 1.3810 (161.8% Fibonacci extension) area back on the radar, with the next region of interest coming in around the November high (1.3899).

Additional Market Outlooks

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--- Written by David Song, Strategist

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