USD/CAD Price Analysis – April 20, 2023
Daily Price Outlook
USD/CAD is up 0.06% in 24 hours, trading at 1.3468. According to futures prices, there is an 85.7% possibility that the Fed will increase interest rates by 25 basis points at its meeting on May 3.
Bostic, the president of the Atlanta Fed, also stated that he favors one more 25bp rate increase followed by a break. According to Bostic, some of the Fed's duties may be accomplished by tightening lending conditions.
The US Dollar Index remained stable at 101.96 despite increasing worries that major central banks may raise interest rates again. The USD/CAD pair benefits from a slight rise in the US dollar.
It is a busy day on the US economic calendar when looking ahead to the US session. The key drivers will be the data for the April Philly Fed Manufacturing Index and the significant US jobless claims statistics.
Oil Continues to Decline as USD/CAD Reacts
Oil prices fell to a new monthly low on concerns that rising borrowing rates would slow economic development and reduce fuel demand.
WTI crude oil fell 1.68% to 77.91. Therefore, oil prices declined as markets revised their expectations for demand this year amid signs of slowing economic growth and growing wagers on more rate rises from significant central banks. The Dollar's strength also weighed on crude prices.
The commodity-linked Canadian Dollar is being held back from gaining due to the drop in oil prices. It is beneficial for USD/CAD.
Canada Prepares for Interest Rate Reduction
Canadian housing starts for March fell 11% domestically, slowing the trend that had been rising after the sharp rise in borrowing prices. Additionally, Canadian producer prices decreased 1.8% year-over-year after increasing 1.4% the previous year.
The y/y figure dropped into negative territory in the Canadian PPI statistics, highlighting the change in Canadian pricing pressures. Moreover, the drop confirms the Bank of Canada's prediction that CPI inflation will drop to 3% this summer and may pave the way for a rate reduction.
It wouldn't be surprising if the Canadian central bank led the way in rate cuts after being the first major central bank to raise rates this cycle. As risk aversion, amid concerns over rate cuts, puts pressure on the Canadian Dollar, USD/CAD rises. For further clarity, traders will focus on the BOC Gov Macklem Speaks later in the day.
Daily Technical Levels:
Support Resistance
1.3407 1.3492
1.3354 1.3522
1.3323 1.3576
Pivot Point: 1.3438
USD/CAD – Technical Outlook
The USD/CAD pair experienced a successful rally, breaking through the downward channel's resistance and paving the way to reach the primary anticipated positive target at 1.3500.
This strengthens the prospects for further gains in the coming sessions, with a breach of the mentioned level potentially extending the bullish wave towards 1.3590.
The 50-day exponential moving average (EMA50) underpins the price and bolsters the likelihood of additional gains in future sessions. However, breaking below 1.3410 would halt the current bullish momentum and push the price to test the critical support at 1.3350 before the next trend can be determined.
Related:
* EUR/USD Price Analysis – April 20, 2023
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