Home USD/CAD Outlook: Finding Bottom at 3-Month Lows

USD/CAD Outlook: Finding Bottom at 3-Month Lows

  • The dollar rebounded from a three-month low.
  • Data indicating faster-than-expected growth in the US economy.
  • The BoC revealed skepticism about the benefits of a potential digital currency.

As Thursday unfolded, the USD/CAD outlook took on a bullish tone, driven by a dollar rebound from a three-month low. However, the dollar was poised to mark its most substantial monthly decline in a year. Investors increased bets that the Fed would refrain from further rate hikes. Moreover, they awaited a crucial inflation report later in the day. 

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Notably, the dollar fell by 3.7% in November amid growing expectations that the Fed will cut interest rates in the first half of 2024. However, the dollar recovered some losses on Wednesday following upbeat data on growth in the US economy.

Attention will be paid on Friday when Fed Chair Jerome Powell will speak. This will follow remarks by Fed Governor Christopher Waller flagging a possible rate cut in the coming months. However, before that, investors will focus on the critical Personal Consumption Expenditure (PCE) price index. US futures markets are currently pricing over 100 basis points of rate cuts next year, starting in May.

Elsewhere, the Bank of Canada (BoC) revealed on Wednesday that most financial institutions expressed skepticism about the benefits of a potential digital currency. Like many other countries, Canada is exploring a digital version of its currency. This move prevents digital payments from being left solely to the private sector. Notably, the COVID-19 pandemic has reduced the use of cash. 

As part of this initiative, the BoC consulted civil society groups, focus groups, financial institutions, and the general public to assess support and the viability of a digital Canadian dollar.

USD/CAD key events today

  • US core PCE price index report
  • US pending home sales report
  • US unemployment claims
  • Canadian GDP

USD/CAD technical outlook: Bulls resurface after the 1.3550 support level

USD/CAD technical outlook
USD/CAD 4-hour chart

The price has recovered on the charts after finding support at the 1.3550 support level. However, the bias remains bearish since the rebound is below the 30-SMA. At the same time, the RSI indicates strong bearish momentum as it trades below 50.

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Bulls are heading for the 30-SMA resistance, which has stopped them many times in the downtrend. Therefore, the price will likely reverse at the SMA, allowing bears to continue the downtrend. Still, there is a chance bulls will break above the SMA and the 1.3650 level to reverse the trend.

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Saqib Iqbal

Saqib Iqbal

Saqib Iqbal is a market analyst, prop fund trader and mentor, serving the industry with his analysis and educational content since 2011. The author has great exposure to different financial markets and institutions. He's well-known for his day trading reviews and multiple timeframe analysis.