Home Forex USD/CAD staggers towards 1.3330s on soft US dollar and tracks 100-DMA

USD/CAD staggers towards 1.3330s on soft US dollar and tracks 100-DMA

by SuperiorInvest
  • The Federal Reserve’s dovish November minutes weighed on the US dollar and strengthened the Canadian dollar.
  • US S&P Global PMIs have plunged into recession, meaning the US economy is slowing rapidly.
  • USD/CAD Price Analysis: Bearish, tracking head and shoulders target at 1.3030.

The Canadian dollar (CAD) continued its advance against the US dollar (USD), thanks to several factors, notably US Federal Reserve (Fed) minutes seen as slightly dovish, with the board poised to slow the pace of rate hikes. That along with the gloom economic outlook in the United States (US), when PMIs were entering recession territory, they weighed on the USD. At the time of writing, USD/CAD is trading at 1.3338, which is 0.17% below its opening price

The US dollar remains soft on Fed officials poised to moderate hikes

Sentiment remains upbeat, amid light-volume trading conditions, on the observance of the US Thanksgiving holiday. On Wednesday, the Federal Open Market Committee (FOMC) released its November minutes, which expressed that “a substantial majority of participants concluded that a slowdown in growth is likely to be appropriate soon,” giving investors the green light to seek riskier assets. However, traders should be aware that policymakers have expressed “uncertainty” about how high rates need to go and will depend on the data.

In the same minutes, recession risks were said to have risen, with a 50% chance of the US economy going into recession as officials acknowledged that risks to growth were skewed to the downside.

In addition, a lot of mixed economic data from the United States on Wednesday saw global manufacturing, services and S&P composite PMIs enter recession territory for November. Later, University of Michigan (UOM) consumer sentiment remained positive at 56.9, below the preliminary reading but above estimates. Inflation expectations were largely unchanged.

Earlier, Initial Jobless Claims for last week beat estimates, showing that the labor market is easing. At the same time, US Durable Good Orders beat forecasts, signaling consumer resilience in a period of high inflation and higher borrowing costs.

Meantime, US dollar index (DXY), a measure of the dollar’s value against a basket of others, fell 0.23% to 105.857 and closed at the 200-day exponential moving average (EMA) at 105.272. If the 200-day EMA is broken, it will weaken the test of 100,000.

Focusing on Canada, Bank of Canada (BoC) Governor Tiff Macklem appeared in Parliament to speak on the October monetary policy report. Macklem did not comment on anything new. He stressed the need to balance the risk of over- and under-tightening. He said they expect rates to rise further, adding that inflation in Canada remains high and expanding, reflecting increases in the prices of goods and services.

USD/CAD Price Analysis: Technical Outlook

USD/CAD resumed its downtrend after testing the head and shoulders on Monday, although it failed to break diagram pattern in the game. The fallout from the November Fed minutes release left USD/CAD trading below 1.3400. However, a lack of liquidity due to the US holiday kept USD/CAD trading on the sidelines. However, USD/CAD’s path of least resistance is to the downside.

Therefore, the first USD/CAD support is 1.3300. A break below reveals the 100-day exponential moving average (EMA) at 1.3264, followed by 1.3200.

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