USD/CAD Price Analysis – Oct 24, 2023

Daily Price Outlook

The USD/CAD currency pair continued its decline during European trading on Tuesday. This downward trend was primarily triggered by a correction in the US Dollar (USD), which had reached a one-month low. However, several factors might curb the extent of the USD's decline. Notably, the rise in US Treasury bond yields is among these factors. Additionally, the escalating tensions in the Middle East could provide some support for the USD. At present, the pair is trading at around 1.3674, marking a 0.12% decrease for the day.

US Interest Rate Hike Speculations and Insights from Federal Reserve Officials

It's worth noting that, according to the CME FedWatch Tool, the probability of an interest rate hike in the US in November is quite low. However, the odds of a rate increase in January 2024 remain above 30%. The Federal Open Market Committee (FOMC) is presently in a blackout period, meaning they are refraining from publicly discussing their intentions.

Atlanta Federal Reserve President Raphael Bostic has expressed his belief that the US central bank won't reduce interest rates before the middle of next year. Philadelphia Fed President Patrick Harker has consistently advocated for maintaining current interest rates. Conversely, Loretta Mester, the President of the Cleveland Fed, holds the view that the US central bank is either at or very close to the peak of the current cycle of interest rate increases. These remarks provide valuable insights into the direction of US monetary policy.

Bank of Canada Interest Rate Decision and Oil Prices

Conversely, investors are closely monitoring the Bank of Canada's upcoming decision regarding interest rates, scheduled for Wednesday. It's widely expected that the bank will maintain the interest rate at 5% for the remainder of this year, with a forecast of a rate cut in the second quarter of 2024.

On a different note, a potential decline in oil prices could exert downward pressure on the Canadian dollar, referred to as the Loonie. This is because Canada plays a significant role as a major oil supplier to the United States. Such a development could significantly impact the strength of the currency.

Upcoming Economic Indicators and Events to Monitor in the US and Canada

Looking forward, investors will keep their eyes on key economic indicators. These include the US S&P Global PMI and the Canadian New Housing Price Index for September, providing insights. Wednesday brings the Bank of Canada's interest rate decision and the pivotal US Q3 GDP estimate. On Friday, the US Core Personal Consumption Expenditure Index (PCE) will offer crucial information about inflation.

On October 24, the USD/CAD trading pair showcases a nuanced narrative, offering traders and analysts alike a glimpse into its current performance and potential future movements. At a present value of 1.36793, the pair has seen a modest decline of 0.10% over the last 24 hours. A look at the 4-hour (4H) chart, a favored perspective among traders for its balance between short-term movements and overarching trends, yields some pivotal insights.

The suite of technical indicators brings forth added clarity. With the RSI valued at 46, we're currently in a neutral zone. Traditionally, values over 70 are interpreted as overbought, while those below 30 indicate oversold conditions. The RSI's sub-50 position suggests a slight bearish sentiment in the market.

The MACD, a momentum-centric indicator, currently reads at -0.00062, juxtaposed against its Signal line at 0.00025. When the MACD line ventures above the signal line, it typically indicates upward momentum. However, in our present configuration, with the MACD line below the signal line, it suggests potential downward momentum.

The 50-Day Exponential Moving Average (EMA) is positioned at 1.3676. As the USD/CAD's price hovers slightly above this EMA, it suggests a tentative bullish short-term trend, although it's precariously close.

In terms of chart patterns, while the 4H chart remains dynamic, no dominant configurations, such as the Symmetrical Triangle or upward channels, have emerged at this juncture. Continuous vigilance is paramount to spot emergent patterns.

Conclusion:

In summation, the overarching sentiment for USD/CAD appears to be bearish, especially if levels dip below the 1.36890 mark. Short-term forecasts suggest the potential for the pair to approach and test the immediate resistance level of 1.3770 in the upcoming sessions. 

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