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  • Consumer spending went up in the US in October.
  • Investors are not expecting another big rate hike from the BoC.
  • The chances of a 50bps BoC hike have gone down to 10%.

Today’s USD/CAD price analysis is slightly bullish as the Canadian dollar weakens on reduced bets of a big hike by the BoC. The dollar held steady on Friday but was restrained close to 16-week lows versus a basket of other currencies. Information indicated higher US consumer spending in October, encouraging investor optimism on the approaching interest rate peak.

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Despite the US dollar losing ground against its significant rivals, the Canadian currency fell against the greenback on Thursday and Friday as investors cut their wagers on the Bank of Canada raising interest rates massively again next week.

The Canadian dollar lost some of its gains from the day when Federal Reserve Chair Jerome Powell suggested that rate increases in the United States would pause in December.

It was the only G10 currency to fall against the dollar. About a basket of major currencies, the dollar decreased by 1.1%.

Because Canadian money markets believe that this cycle, the Federal Reserve will increase interest rates more than the Bank of Canada, they provide lower rates than those in the US.

Since Powell’s remarks, the likelihood that the BoC will decide to raise interest rates by 50 basis points as opposed to 25 basis points has decreased from 30% to about 10%, according to data from the money market.

USD/CAD key events today

Investors will pay attention to job reports from the US and Canada. The US nonfarm payroll data will explain how rate hikes have affected the labor market.

USD/CAD technical price analysis: Weak rebound in play

USD/CAD price analysis

The 4-hour chart shows that the price is trading just below the 30-SMA and the RSI below 50, showing that bears are in charge. The bearish move has paused below the 30-SMA after breaking below the 1.3500 key level.

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Bulls have taken this opportunity to retest the recently broken SMA, and the move up is less strong than the previous move. This could mean a return of strong bearish momentum. If the SMA holds as resistance, the price will bounce lower and look to retest support at 1.3325.

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