- A surge in risk aversion supported the dollar on Friday.
- Fed Chair Jerome Powell supported further rate hikes in the United States.
- Concerns over the global economy and fuel demand arose due to higher interest rates worldwide.
Today’s USD/CAD outlook is slightly bullish. On Friday, a surge in risk aversion supported the dollar. This was due to hawkish remarks from various global central banks, including the Federal Reserve.
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These comments raised concerns that these banks’ intense monetary tightening measures could potentially lead economies into a more severe downturn.
Notably, concerns about global growth were fueled by multiple rate hikes from central banks, including the Bank of England. Moreover, the Reserve Bank of Australia and the Bank of Canada tightened their policies earlier this month.
Karl Schamotta, chief market strategist at Corpay, stated, “The Bank of Canada’s hawkish stance no longer appears unique when we see the Bank of England, the Reserve Bank of Australia, and others joining in.”
Still, on Thursday, the Canadian dollar advanced against the US dollar, continuing its recent gains.
However, Schamotta warned that investors should exercise caution in pursuing additional gains for the Canadian dollar, considering the approaching end of the second quarter and the psychological level of 1.30. He added, “Attempting to surpass 1.30 prematurely may result in being on the wrong side of a significant reversal.”
Elsewhere, the price of oil, a key Canadian export, settled at $69.51 per barrel. This arose as concerns over the global economy and fuel demand arose due to higher interest rates worldwide.
USD/CAD key events today
Investors are awaiting the US services PMI report showing business activity levels in the services sector. This value is expected to drop from a previous 54.9 to 54.0.
USD/CAD technical outlook: Bulls charge at the 30-SMA with a strong candle.
USD/CAD is retesting the 1.3200 key level and the 30-SMA resistance in the 4-hour chart. This comes amid a strong downtrend, with the price making lower lows and highs. Furthermore, the price has repeatedly respected the 30-SMA as resistance. At the same time, the RSI has bounced lower every time it got to the 50 mark, showing bearish momentum is strong.
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However, bulls have made a strong move to the 30-SMA that could lead to a reversal. Bulls will set their sights on the 1.3351 resistance level if the price breaks above.
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