Home Forex USD/CAD faces barricades around 1.3580 as focus shifts to FOMC minutes

USD/CAD faces barricades around 1.3580 as focus shifts to FOMC minutes

by SuperiorInvest
  • USD/CAD felt selling pressure after failing to break the 1.3580 resistance.
  • Risk-sensitive currencies are gaining strength as investors expect weak movement in the USD index.
  • The release of FOMC minutes and Canadian employment data will remain in focus.

The USD/CAD the pair is showing some volatile moves at the start of the Tokyo session after failing to break above the immediate resistance of 1.3580. The Loonie asset is attracting bids led by better investors willingness to take risks and rising oil prices.

Risk-sensitive currencies are gaining strength as investors expect weak performance to carry over into US dollar index forward. The USD index witnessed a sharp decline on Friday after relinquishing key support at 103.50. Meanwhile, S&P500 futures opened the session on a positive note, suggesting that the risk profile is becoming more cheerful.

This week’s release of the Federal Open Market Committee (FOMC) will garner attention. The minutes from the FOMC will provide a rationale for interest in hiking rates by 50 basis points (bps) in December Federal Reserve (Fed) monetary policy.

In a preview of upcoming U.S. events this week, TD Securities analysts said they expect minutes from the FOMC’s December policy meeting to shed further light on the Fed’s policy outlook for 2023. TD Securities analysts believe the terminal rate will reach a range of 5 .25-5.50% until the May FOMC meeting.

On the Loonie front, investors will focus on the release of Canadian employment data due on Friday. Analysts at TD Securities said they expected employment to rise by 8,000 in December as the labor market begins to cool. The Unemployment rate could decrease to 5.2% and the wage spread could increase to 5.5% per year. An increase in wage growth could keep inflation at elevated levels.

Meanwhile, the price of oil has moved higher to near $80.50 as investors see a peak in Covid-19 cases in China, which will put the economy back on track. It is worth noting that Canada is a leading exporter of oil to the United States, and higher oil prices support the Canadian dollar.

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