- The US dollar has recently risen due to a change in the Fed’s policy outlook.
- The loonie fell as oil prices fell 3%.
- Traders brace for Canadian inflation data.
The USD/CAD outlook shows fundamentals supporting further upside for the pair. Fed policymakers took a more cautious tone on the upbeat data, boosting the greenback. At the same time, the Loonie is falling with oil on concerns about demand and easing supply concerns.
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The US dollar has recently risen against the Canadian dollar due to a change in the Fed’s policy outlook. US data showed a resilient economy, with inflation rising more than expected in September. As a result, market participants began to set prices with a low probability of a break in November.
Meanwhile, policymakers have resorted to cautious remarks about rate cuts. Christopher Waller and Neal Kashkari agreed that the Fed should proceed with caution. This is a significant change from September, when the Fed cut rates by 50 basis points.
Meanwhile, the Canadian dollar fell as oil prices fell 3 percent on Tuesday. The drop came after data from China revealed a drop in oil imports in September. Moreover, market participants were disappointed by recent efforts to support China’s fragile economy. At the same time, supply concerns eased after Israel said it may not strike Iranian oil. For weeks, oil rose on the possibility of retaliation after Iran hit Israel with more than 200 missiles.
Elsewhere, traders are bracing for Canadian inflation data. Economists expect all inflation numbers to remain the same from last month. Therefore, the monthly figure is likely to fall by 0.2%. A bigger-than-expected drop will increase bets for a Bank of Canada rate cut, further sinking the CAD.
USD/CAD Key Events Today
- Canada CPI m/m
- Canadian Average CPI y/y
- Canada decreased CPI y/y
USD/CAD Technical Outlook: Rally crosses 1.3800 barrier
On the technical side, the USD/CAD price has risen to the key psychological level of 1.3800 and is trading well above the 30-SMA. Meanwhile, the RSI remained in the overbought region for a while, indicating solid bullish momentum.
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The bullish bias is strong. However, the price went up for a long time without pulling back. At the same time, the RSI made a bearish divergence. Because of this, the bulls are exhausted and may soon stop before moving on. Accordingly, the price may soon return to the support level of 30-SMA or 1.3700.
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