USD/CAD Price Analysis: Bulls Fade Despite Fed’s Hawkishness

USD/CAD Price Analysis: Bulls Fade Despite Fed’s Hawkishness

  • Fed policymakers are calling for tighter monetary policy, boosting the dollar.
  • BoC governor Macklem admitted that low-income Canadians would bear the rising rates’ brunt.
  • Analysts expect Canada’s inflation to hold at 6.9% in October.

Today’s USD/CAD price analysis is slightly bullish. On Tuesday, the US dollar strengthened versus other major peers as more Federal Reserve officials argued for tighter US monetary policy.

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The dollar pushed up slightly as Fed Vice Chair Lael Brainard reiterated on Monday what Fed Governor Christopher Waller had said over the weekend: interest rates must continue to rise to combat inflation, though perhaps at a slower rate.

“Fed speaker(s) have set the tone, reminding markets that there is still a lot of work to be done to bring inflation to heal,” National Australia Bank senior FX strategist Rodrigo Catril wrote in a note to clients.

According to Bank of Canada Governor Tiff Macklem, lower-income Canadians will be disproportionately impacted by the slowdown in economic activity required to reduce inflationary pressures.

In one of its fastest tightening campaigns, the Bank of Canada has increased its policy rate by 350 basis points to 3.75% since March. It predicted that the Canadian economy would stagnate late last month through the first half of 2023.

The inflation rate in Canada has decreased to 6.9% from a recent high of 8.1%, but it is still significantly higher than the central bank’s 2% target. According to analysts surveyed by Reuters, inflation will remain at 6.9% in October.

USD/CAD key events today

Investors expect inflation data from the United States that will show the change in the price of goods sold by manufacturers. Price changes at the manufacturing level can be passed on to consumers, affecting consumer price inflation.

USD/CAD technical price analysis: Weak rebound attempt fails

USD/CAD price analysis

Looking at the 4-hour chart, we see the price trading below the 30-SMA and the RSI below 50, showing bears are in charge. The price found support at the 1.3250 level, where bulls took over, pushing the price higher. However, the move was weak at best. The price made small-bodied candles that lacked strength.

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Bears have come back stronger and are currently pushing the price lower. They will be looking to take our support at 1.3250 and continue the downtrend. If this support holds, bulls might return to retest the 30-SMA.

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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.