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  • Investors were not surprised by the Fed rate hike, which saw USD/CAD push lower yesterday.
  • Recession concerns after the rate hike are pushing the dollar higher today.
  • USD/CAD bulls could attempt a break of 1.3000 in the charts.

After the 75-bps rate hike widely predicted by the market, the USD/CAD price went up as investors worried about the possibility of a tighter monetary policy pushing the economy into a recession.

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But by late afternoon New York time, investors’ growth concerns were reduced, and instead, they believed that the economy would be better off in the long run if the Fed controlled inflation. The market’s relief that the Fed had delivered what it expected extended to Treasuries.

At a news conference afterward, Fed Chair Jerome Powell said that a 50- or 75-basis-point increase at its next meeting in July seemed most likely and that the economy was strong enough to handle a tighter policy.

“Whether or not we can escape this without a recession is coming into question,” said Ellen Hazen, chief market strategist at F.L.Putnam Investment Management in Massachusetts.

“The runway for them to have a soft landing just got shorter and narrower, meaning that they are anticipating higher inflation, higher unemployment, and lower GDP (gross domestic product),” Hazen said.

The US dollar is extending gains on Thursday and is pushing USD/CAD higher.

USD/CAD key events today

Later in the day, investors expect a drop in the US’s initial jobless claims and building permits. A 0.1% drop in Canadian wholesale sales is also expected later today.

USD/CAD price technical analysis: Bullish momentum staying intact

USD/CAD price

The 4-hour chart shows a strong bullish trend that pushed the price above 1.2900, then pulled back sharply. The price is attempting to get to 1.30000 after the retracement and could get there if bulls remain strong. The RSI is well above the 50 level, favoring bullish momentum.

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The sharp pullback in the trend is a sign that bears are waiting for bullish weakness so they can get in and turn the market. If the price can get to a higher high at or above 1.3000, we can see if bulls are strong enough to keep pushing beyond that level.

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