- The dollar rose with Treasury yields.
- The Canadian dollar fell with oil prices.
- There is a 60% chance the BoC will cut rates on Wednesday next week.
The USD/CAD outlook shows an increase in bullish momentum as the dollar rises with rising Treasury yields on expectations that the Fed will keep rates high for longer. Meanwhile, the Canadian dollar fell with oil prices as investors worried about the impact of high interest rates on fuel demand.
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It was a green day for the dollar, which benefited from safe-haven flows as investors scrambled for safety amid a jump in Treasury yields. As a result, most major peers, such as the Canadian dollar, fell. The rise in yields began when the US released better-than-expected economic data last week. As a result, expectations for a rate cut have fallen. However, the move escalated, with yields hitting a four-week high after a weak U.S. debt auction.
The next big catalyst for the dollar will be Friday’s inflation report. This will give market participants better insight into Fed policy.
Meanwhile, the Canadian dollar was on the back foot as oil prices fell in response to fears of further delays in Fed rate cuts. High borrowing costs hurt economic activity, which in turn reduces demand for oil. Canada, a major oil exporter, suffers losses when demand falls, which affects the country’s currency.
Investors await Friday’s GDP data from Canada, which could show an annual growth rate of 2.2% in Q1. This will give traders clues about the prospects for a rate cut by the Bank of Canada. There is currently a 60% chance the BoC will cut rates on Wednesday next week.
USD/CAD Key Events Today
- US preliminary GDP
- US Unemployment Claims
- USA is waiting for the sale of the house
USD/CAD technical outlook: resistance retested at 1.3730
On the technical side, the USD/CAD price rose to retest the resistance level at 1.3730 after finding support at the 1.3625 level. Although the price is well above the 30-SMA, there is no clear direction as it has mostly crossed the SMA line.
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However, the current bias is bullish, with the RSI well above 50, supporting solid momentum. Therefore, a break or pullback to retest the SMA may come before the uptrend resumes. A break above 1.3730 would pave the way for the bulls to retest the resistance level at 1.3775.
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