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  • Consumer prices in the US dipped in December.
  • Investors are now wagering that the Fed may be approaching the end of its rate-hike cycle.
  • The Canadian dollar was slightly weaker than the dollar on Monday due to falling oil prices.

Today’s USD/CAD outlook is slightly bearish. On Monday, the dollar’s value against important peers hit a seven-month low. However, USD/CAD rose slightly as a drop in oil prices hurt the Canadian dollar.

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The US dollar index sank 0.46% to 101.79, its lowest level in seven months, as the dollar continued to fall after consumer prices in the US dipped in December.

Investors are now wagering that the Fed may be approaching the end of its rate-hike cycle and that rates might not go as high as previously feared since the world’s largest economy’s decades-high inflation is beginning to moderate.

The OCBC analysts stated that the confirmation of a decrease in pricing pressures is setting up optimism that CPI could fall lower in the coming months.

Last year, the Fed’s rapid rate hikes were a major factor in the 8% gain in the dollar’s value.

Markets predict that the Fed will make its policy decision in February with a 91% chance of a 25 basis point increase and a 9% possibility of a 50 bp increase.

The Canadian dollar was weaker on Monday due to falling oil prices. However, oil prices remained close to 2023 highs due to the belief that China’s lifting of COVID limitations will increase gasoline demand in the world’s largest petroleum importer.

USD/CAD key events today

There will be no significant news announcements from Canada or the United States celebrating the Martin Luther King, Jr. Day holiday. The price will, therefore, likely consolidate.

USD/CAD technical outlook: Bulls show strength at the 1.3351 support

USD/CAD outlook
USD/CAD outlook

In the 4-hour chart, USD/CAD is trading close to the 30-SMA after pausing at the 1.3351 support level. The pair has been trending lower and staying below the 30-SMA until bulls showed strength at the 1.3351 support. 

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The price pushed off this support level with a large-bodied bullish candle puncturing the 30-SMA. The RSI has also made a bullish divergence that shows weakness in the bearish move. Although the price is trading slightly below the 30-SMA and the RSI below 50, bulls might be ready to take over.

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