Canadian Dollar Forecast: USD/CAD Multi-Week Highs Under Pressure
Canadian Dollar Outlook: USD/CAD Price, Analysis and Chart
- Multi-week high may prove fleeting resistance.
- BoC dep gov Wilkins inflating the winter tires.
USD/CAD Pressing Multi-Week Highs on BoC Dovish Twist
Canadian interest rates are likely to be cut early next year with the country’s economy at risk from the global downturn. Bank of Canada dep gov Carolyn Wilkins said earlier this week that while a domestic recession isn’t in the central bank’s forecast, measures need to be in place in case events take a turn for the worse, giving the market a dovish nudge.
“The Bank of Canada and other authorities must assess the risks and have the right safeguards in place. Ideally, you want to put the winter tires on before the snow falls. It not only protects you, but also everyone else who’s on the road,” wrote Wilkins. Deputy governor Wilkins comments on Tuesday sent USD/CAD sharply higher with the rally continuing on Wednesday.
Later today, Bank of Canada’s governor Stephen Poloz will be talking at an event in Toronto, just three weeks after saying that Canada’s economy will be increasingly tested. The central bank left interest rates unchanged at 1.75% but the next move is now expected to be lower with a rate cut being pencilled in by the markets for January. Governor Poloz’s words today will be parsed carefully for any further hints about future monetary policy measures.
The daily USD/CAD chart shows the recent weakening of the Canadian dollar against its American counterpart. USD/CAD recently broke and closed the 200-day moving average, a positive chart signal, and the pair are now nearing highs last seen around six weeks ago. To the upside the 23.6% Fib retracement level at 1.3335 guards the three recent highs around 1.3346-1.3348, which if broken will open the way to the September 3 high print at 1.3382 ahead of a potential rally all the way back to the May 31 high at 1.3565. Initial support off the 200-dma and Tuesday’s high/Wednesday’s low around 1.3270.
USD/CAD Daily Price Chart (November 2018 – November 21, 2019)
IG Client Sentiment shows that traders are 77% net-short USD/CAD, a bullish contrarian bias.
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