USD/CAD Pullback Keeps RSI Below Overbought Territory

Canada Dollar Outlook: USD/CAD

USD/CAD pulls back from a fresh yearly high (1.4271) to keep the Relative Strength Index (RSI) below overbought territory, but a move above 70 in the oscillator is likely to be accompanied by a further advance in the exchange rate like the price action from earlier this year.

USD/CAD Pullback Keeps RSI Below Overbought Territory

USD/CAD may attempt to test the April 2020 high (1.4299) as it continues to carve a series of higher highs and lows, and the exchange rate may track the positive slope in the 50-Day SMA (1.3953) as it holds above the moving average.

Join David Song for the Weekly Fundamental Market Outlook webinar.

At the same time, the update to Canada’s Consumer Price Index (CPI) may do little to curb the rise in USD/CAD as the headline reading for inflation is expected to hold steady at 2.0%, and the Bank of Canada (BoC) may keep the door open to implement lower interest rates as the central bank pledges to ‘support growth and keep inflation close to the middle of the 1-3% target range.’

In turn, USD/CAD may continue to appreciate ahead of the Federal Reserve interest rate decision on December 18, but a higher-than-expected CPI print may generate a bullish reaction in the Canadian Dollar as Governor Tiff Macklem and Co. reveal that ‘we will be evaluating the need for further reductions in the policy rate one decision at a time.’

With that said, USD/CAD may struggle to test the April 2020 high (1.4299) if it fails to extend the bullish price series, but the RSI may show the bullish momentum gathering pace should it push above 70 and climb into overbought territory.

USD/CAD Price Chart – Daily

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

USD/CAD continues to appreciate after staging a four-week rally, with the exchange rate climbing to a fresh yearly high (1.4271) as it extends the bullish price series from last week.
A breach above the April 2020 high (1.4299) opens up 1.4480 (100% Fibonacci extension), with the next area of interest coming in around 1.4590 (161.8% Fibonacci extension).
At the same time, lack of momentum to push above the April 2020 high (1.4299) may pull the Relative Strength Index (RSI) back from overbought territory, with a move below 1.4210 (78.6% Fibonacci extension) bringing the 1.4040 (23.6% Fibonacci retracement) to 1.4080 (78.6% Fibonacci extension) area back on the radar.

Additional Market Outlooks

US Dollar Forecast: EUR/USD Attempts to Halt Five-Day Selloff

USD/JPY Stages Five-Day Rally for First Time Since June

Gold Price Forecast: Bullion Remains Below Pre-US Election Prices

GBP/USD Outlook Hinges on Break of December Opening Range

--- Written by David Song, Senior Strategist

Follow on Twitter at @DavidJSong

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.