USD/CAD Price Analysis – Oct 15, 2024
Daily Price Outlook
During the European trading session, the USD/CAD currency pair maintained its upward trend and remained well-bid around $1.3815 level, hitting the intra-day high of 1.3816 level. However, the reason for its upward trend can be attributed to the bullish US dollar, which gained positive traction on the back of expectations that the Federal Reserve will ease its policy less aggressively.
Apart from this, the upcoming CPI data from Canada could impact the USD/CAD pair significantly. A higher-than-expected inflation rate may strengthen the Canadian dollar as it raises prospects for tighter monetary policy, while weaker data might lead to a weaker CAD against the USD.
Canadian Inflation Data and Its Impact on the CAD Outlook
On the CAD front, Canada is set to release its latest inflation data on Tuesday, with forecasts suggesting that the Consumer Price Index (CPI) could have risen by 1.8% year-over-year in September. Alongside the headline CPI, the Bank of Canada (BoC) will publish its core CPI, which excludes volatile food and energy prices. In August, the core CPI decreased by 0.1% from the previous month and rose by 1.5% year-over-year.
However, the headline CPI also showed a modest increase of 2.0% over the past year, marking its lowest level since February 2021. The BoC has been in an easing cycle, having cut its policy rate by 25 basis points during its meetings in June, July, and September, bringing the rate down to 4.25%.
The Canadian Dollar (CAD) has been under pressure. Analysts are divided on the future of price pressures in Canada, but many expect the headline inflation to remain below the BoC’s target for now. The BoC's Governor, Tiff Macklem, indicated that while further rate cuts are likely, it’s crucial to keep inflation near the midpoint of the control range of 1%–3%.
US Dollar Strengthens Amid Fed Rate Cut Speculation, Impacting USD/CAD Trends
On the US front, the US Dollar has risen to its highest level since August 8, primarily due to expectations that the Federal Reserve will not be as aggressive in cutting interest rates. Traders are now anticipating a 25 basis point cut in November. Minneapolis Fed President Neel Kashkari mentioned that current monetary policy remains restrictive and that moderate rate cuts may be appropriate since the job market is still strong.
Furthermore, Fed Governor Christopher Waller pointed out that the economy is doing well and may not be slowing as much as previously thought, indicating that the Fed should be cautious with further cuts. This positive sentiment around the US Dollar could limit gains for the Canadian Dollar (CAD) against the USD, as a stronger dollar typically leads to a weaker CAD. Despite this, the CAD could receive support from ongoing concerns about geopolitical tensions, which often drive investors toward safe-haven assets.
As traders look ahead, attention will shift to the upcoming Empire State Manufacturing Index release and additional comments from Fed officials. These events could present short-term trading opportunities for the USD/CAD pair, influencing the currency's movements in the North American session.
USD/CAD - Technical Analysis
USD/CAD is trading at $1.38066, up 0.08%, as it continues its upward momentum, testing key resistance levels. The pivot point stands at $1.38387, indicating bullish sentiment in the market. Immediate resistance is seen at $1.38703, with further resistance levels at $1.39030. If USD/CAD breaks above these levels, we could see the pair push higher toward $1.39500.
On the downside, immediate support is located at $1.37583, with deeper support at $1.37273 and $1.37044. Any break below these levels could signal a pullback, potentially weakening the current uptrend. The 50-day EMA is at $1.35957, offering strong support, suggesting that the overall bias remains bullish.
The RSI is at 72, signaling that USD/CAD is in overbought territory. While this indicates strong buying pressure, it also suggests a potential short-term correction.
Given the technical outlook, traders may look to buy above $1.37914, targeting $1.38703, with a stop loss set at $1.37409.
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