All trading involves risk. Ensure you understand those risks before trading.
All trading involves risk. Ensure you understand those risks before trading.

USD/CAD Defends Post-BoC Reaction to Eye August High

Article By: ,  Strategist

US Dollar Forecast: USD/CAD

USD/CAD attempts to extend the advance following the Bank of Canada (BoC) rate cut as it trades to a fresh monthly high (1.3869), and the Relative Strength Index (RSI) may show the bullish momentum gathering pace as it continues to flirt with overbought territory.

USD/CAD Rally Eyes August High as RSI Pushes into Overbought Zone

USD/CAD may further retrace the decline from the August high (1.3947) as the BoC reveals that ‘if the economy evolves broadly in line with our latest forecast, we expect to reduce the policy rate further,’ but the exchange rate may consolidate over the remainder of the month as Canada Retail Sales is expected to increase for the second consecutive month.

 

 

Canada Economic Calendar

Retail spending is projected to increase 0.5% in August following the 0.9% expansion the month prior, and a positive development may keep USD/CAD within the weekly range as it puts pressure on the BoC to pause its rate-cutting cycle.

At the same time, a weaker-than-expected Retail Sales report may encourage the BoC to implement another 50bp rate cut at its next meeting on December 11, and the Canadian Dollar may face headwinds over the remainder of the month as Governor Tiff Macklem and Co. now state that ‘the timing and pace of further reductions in the policy rate will be guided by incoming information and our assessment of its implications for the inflation outlook.’

With that said, USD/CAD may stage further attempts to test the August high (1.3947) the BoC endorses a dovish forward guidance, but the RSI may show the bullish momentum abating if it struggles to hold above 70. 

USD/CAD Price Chart – Daily

Chart Prepared by David Song, Strategist; USD/CAD Price on TradingView

  • USD/CAD may continue to trade to fresh monthly highs as long as the Relative Strength Index (RSI) holds in overbought territory, with a close above the 1.3810 (161.8% Fibonacci extension) to 1.3850 (50% Fibonacci extension) region opening up 1.3900 (50% Fibonacci extension).
  • Next area of interest coming in around the August high (1.3947) but the recent advance in USD/CAD may unravel if it struggles to close above the 1.3810 (161.8% Fibonacci extension) to 1.3850 (50% Fibonacci extension) region.
  • Failure to defend the weekly low (1.3798) may push USD/CAD back towards 1.3700 (38.2% Fibonacci extension), with a breach below 1.3630 (38.2% Fibonacci retracement) bringing 1.3520 (23.6% Fibonacci extension) on the radar.

Additional Market Outlooks

GBP/USD Vulnerable as Bearish Price Series Persists

US Dollar Forecast: USD/JPY Rally Triggers Overbought RSI Signal

EUR/USD Weakness Pushes RSI Back into Oversold Zone

US Dollar Forecast: AUD/USD Falls Toward September Low

--- Written by David Song, Senior Strategist

Follow on Twitter at @DavidJSong

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.

© City Index 2024