- The dollar rose with Treasury yields.
- The Canadian dollar fell with oil prices.
- There is a 60% chance that the BoC will cut rates on Wednesday next week.
The USD/CAD outlook shows a surge in bullish momentum as the dollar rallies with rising Treasury yields due to expectations that the Fed will keep high rates for longer. Meanwhile, the Canadian dollar fell with oil prices as investors worried about the impact of high interest rates on fuel demand.
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It was a green day for the dollar, which benefited from safe-haven inflows as investors scrambled for safety due to the spike in Treasury yields. As a result, most major peers, such as the Canadian dollar, fell. The rise in yields started when the US released better-than-expected economic data last week. As a result, rate cut expectations fell. However, the move escalated, with yields reaching a four-week peak after a weak debt auction in the US.
The next major catalyst for the dollar will be the Friday inflation report. This will give market participants more insight into the Fed’s policy path.
Meanwhile, the Canadian dollar was on the back foot as oil prices declined in response to fears of further delays in Fed rate cuts. High borrowing costs hurt economic activity, which in turn lowers demand for oil. Canada, a major oil exporter, suffers losses when demand goes down, which weighs on the country’s currency.
Investors are awaiting GDP data from Canada on Friday, which might show an annual growth rate of 2.2% in Q1. This will give traders clues on the outlook for Bank of Canada rate cuts. Currently, there is a 60% chance that the BoC will cut rates on Wednesday next week.
USD/CAD key events today
- US preliminary GDP
- US jobless claims
- US pending home sales
USD/CAD technical outlook: 1.3730 resistance retested
On the technical side, the USD/CAD price has risen to retest the 1.3730 resistance level after finding support at the 1.3625 level. Although the price sits well above the 30-SMA, there is no clear direction since it has mostly chopped through the SMA line.
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Still, the current bias is bullish, with the RSI well above 50, which supports solid momentum. Therefore, a pause or pullback to retest the SMA might occur before the uptrend continues. A break above 1.3730 would clear the path for bulls to retest the 1.3775 resistance level.
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Saqib Iqbal
