USD/CAD Pullback Keeps RSI Below Overbought Territory

Canada Dollar Outlook: USD/CAD

USD/CAD pulls back from a fresh yearly high (1.4271) to keep the Relative Strength Index (RSI) below overbought territory, but a move above 70 in the oscillator is likely to be accompanied by a further advance in the exchange rate like the price action from earlier this year.

USD/CAD Pullback Keeps RSI Below Overbought Territory

USD/CAD may attempt to test the April 2020 high (1.4299) as it continues to carve a series of higher highs and lows, and the exchange rate may track the positive slope in the 50-Day SMA (1.3953) as it holds above the moving average.

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

At the same time, the update to Canada’s Consumer Price Index (CPI) may do little to curb the rise in USD/CAD as the headline reading for inflation is expected to hold steady at 2.0%, and the Bank of Canada (BoC) may keep the door open to implement lower interest rates as the central bank pledges to ‘support growth and keep inflation close to the middle of the 1-3% target range.’

In turn, USD/CAD may continue to appreciate ahead of the Federal Reserve interest rate decision on December 18, but a higher-than-expected CPI print may generate a bullish reaction in the Canadian Dollar as Governor Tiff Macklem and Co. reveal that ‘we will be evaluating the need for further reductions in the policy rate one decision at a time.’

With that said, USD/CAD may struggle to test the April 2020 high (1.4299) if it fails to extend the bullish price series, but the RSI may show the bullish momentum gathering pace should it push above 70 and climb into overbought territory.

USD/CAD Price Chart – Daily

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

USD/CAD continues to appreciate after staging a four-week rally, with the exchange rate climbing to a fresh yearly high (1.4271) as it extends the bullish price series from last week.
A breach above the April 2020 high (1.4299) opens up 1.4480 (100% Fibonacci extension), with the next area of interest coming in around 1.4590 (161.8% Fibonacci extension).
At the same time, lack of momentum to push above the April 2020 high (1.4299) may pull the Relative Strength Index (RSI) back from overbought territory, with a move below 1.4210 (78.6% Fibonacci extension) bringing the 1.4040 (23.6% Fibonacci retracement) to 1.4080 (78.6% Fibonacci extension) area back on the radar.

Additional Market Outlooks

US Dollar Forecast: EUR/USD Attempts to Halt Five-Day Selloff

USD/JPY Stages Five-Day Rally for First Time Since June

Gold Price Forecast: Bullion Remains Below Pre-US Election Prices

GBP/USD Outlook Hinges on Break of December Opening Range

--- Written by David Song, Senior 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.