The USD/CAD continues its downward trajectory below 1.3670, with the looming US NFP data on the horizon.
FUNDAMENTAL OVERVIEW:
- On Friday, the USD/CAD is trading slightly lower around 1.3660.
- Initial Jobless Claims in the US held steady at 208,000 last week.
- The Bank of Canada Governor noted constraints on how much Canadian monetary policy can deviate from that of the US.
During Asian trading hours on Friday, the USD/CAD pair continued its decline, hovering around 1.3660, largely influenced by the weakening US Dollar (USD). Following the Federal Reserve’s decision to keep interest rates unchanged on Wednesday, the Greenback has been on a downward trend, especially as Fed Chair Jerome Powell’s stance was less hawkish than anticipated. Attention now turns to the US April employment data scheduled for release later in the day.
On Wednesday, the Federal Reserve opted to maintain its current monetary policy stance but indicated a prolonged period before gaining confidence in inflation reaching the 2% target. Powell remarked that the likelihood of the next policy rate adjustment being an increase is low, emphasizing the need for further data to inform decisions regarding rate adjustments. Additionally, the US central bank announced a deceleration in its balance sheet reduction (QT).
Regarding the Canadian Dollar (CAD), Bank of Canada (BoC) Governor Tiff Macklem mentioned on Thursday that there’s a boundary to the extent Canadian monetary policy can deviate from that of the US, although they haven’t reached that threshold. Market forecasts anticipate interest rate cuts by the BoC in June or July, given the notable decrease in inflation within Canada. The anticipated disparity in US and Canadian interest rates may place downward pressure on the Canadian Dollar (CAD) in the future, potentially limiting the downside of USD/CAD.
USD/CAD TECHNICAL ANALYSIS DAILY CHART:
Technical Overview:
USD/CAD is trading within a down channel.
USD/CAD is moving below all the Moving Averages (SMA).
The Relative Strength Index (RSI) is in the Selling zone, while the Stochastic oscillator suggests a Negative trend.
Immediate Resistance level: 1.3639
Immediate support level: 1.3606
HOW TO TRADE USD/CAD
USD/CAD initially rose rapidly, but it was rejected and fell. Later, it tried to rise again, but it was unable to hold the gains and fell sharply. As of right now, it has broken both the key support zone and the low from the previous day, and it is currently exhibiting sell on rise indications.