CFD Trading Rate US Dollar vs Canadian Dollar (USDCAD)

• USD/CAD drops to over a one-week low and is pressured by a combination of factors.
• Bullish Oil prices underpin the Loonie and weigh on the pair amid a softer Greenback.
• The US PCE Price Index keeps the June Fed rate cut on the table and weighs on the buck.

The USD/CAD pair extends its recent pullback from the 1.3610-1.3615 supply zone, or the YTD peak and remains under some selling pressure for the sixth successive day on Monday. The downfall, however, stalls ahead of the 1.3500 psychological mark, allowing spot prices to recover a few pips from over a one-week low touched during the Asian session.

Crude Oil prices advance to a five-month peak in the wake of concerns about tighter global supply – fuelled by OPEC+ cuts, attacks on Russian refineries and upbeat Chinese manufacturing data. This, in turn, underpins the commodity-linked Loonie, which, along with a modest US Dollar (USD) weakness, is seen exerting some downward pressure on the USD/CAD pair. In fact, OPEC+ pledged to extend production cuts to the end of June.

Meanwhile, Russian Deputy Prime Minister Alexander Novak said on Friday that its Oil companies will focus on reducing output rather than exports in the second quarter. Moreover, Ukrainian drone attacks knocked out several Russian refineries, which is expected to reduce Russia's Oil exports. Furthermore, a pickup in China's manufacturing activity for the first time in six months adds to the optimism about a rise in fuel demand.

The US Dollar (USD), on the other hand, struggles to lure buyers amid expectations that the Federal Reserve (Fed) will begin its rate-cutting cycle in June, bolstered by the lack of any big surprises from the US Personal Consumption Expenditures (PCE) Price Index on Friday. This, along with the prevalent risk-on environment, is seen weighing on the safe-haven buck and contributing to the offered tone surrounding the USD/CAD pair.

Market participants now look forward to the release of the US ISM Manufacturing PMI for some impetus ahead of the Bank of Canada (BoC) Business Outlook Survey. This, along with Oil price dynamics, should contribute to producing short-term trading opportunities around the USD/CAD pair. The focus, however, will remain glued to the closely-watched monthly employment figures from the US and Canada, due on Friday.

• US February’s PCE figures largely met expectations.
• Next week, the focus will be on Nonfarm payrolls for markets to continue placing their bets on the next Fed decisions.
• Hot data may justify a delay in policy rate cuts beyond June.

The USD/CAD pair is currently trading around the 1.3543 level on Friday, reflecting minor losses after hitting a high of 1.3560 earlier in the session. While investors digest Personal Consumption Expenditures (PCE) figures, the market will turn its attention toward forthcoming employment-related figures that may add further nuance to the Federal Reserve's (Fed) posture on a probable policy rate delay.

The PCE Price Index, preferred by the Federal Reserve for gauging inflation in the US, saw a slight uptick to 2.5% annually in February, up from January's 2.4%, meeting expectations. The monthly increase of 0.3% was slightly below the forecasted 0.4%. Core PCE, which excludes food and energy, also rose by 2.8% annually, aligning with predictions, with a 0.3% monthly increase. The upward revision of January's core PCE figures suggests a continued trend of inflation, potentially prompting the Federal Reserve to maintain higher interest rates.

Future policy decisions will be influenced by incoming data, and the health of the labor market may potentially lead to adjustments in the timing and scale of rate cuts. Strong employment figures could prompt Fed policymakers to delay rate cuts beyond June and possibly reduce the number of cuts projected for 2024 from three to two, potentially bolstering the US Dollar. As for now, the strongest case scenario continues to be three rate cuts in 2024, starting in June.

USD/CAD technical analysis

On the daily chart, USD/CAD shows a somewhat stable trend. The Relative Strength Index (RSI) primarily maintains itself in positive territory, indicating that buying pressure slightly dominates the market. However, the Moving Average Convergence Divergence (MACD) histogram printed a new red bar which may imply a weak bullish momentum.

Analyzing the Simple Moving Average (SMA), it is seen that on a broader scale, despite showing a neutral outlook in the short term, the pair is above the 20,100,200-day SMAs. This suggests that the bulls command the overall trend, as long as the bulls defend the challenged 20-day average around the 1.3530 area.

USD/CAD daily chart

• USD/CAD holds its position after recovering daily losses on Friday.
• US Dollar strengthens on hawkish sentiment surrounding the Fed maintaining higher policy rates.
• Canadian Dollar received upward support from the higher WTI price.

USD/CAD hovers around 1.3540 during the Asian hours on Friday, showing signs of potentially ending its four-day losing streak. However, trading volumes are expected to be light due to Good Friday. The US Dollar's (USD) strength may be attributed to the hawkish sentiment surrounding the Federal Reserve's intention to maintain higher interest rates.

This shift in sentiment could be linked to recent robust economic data from the United States (US). Additionally, Federal Reserve Governor Christopher Waller's cautionary remarks, indicating no urgency to begin rate cuts, have tempered market expectations of three rate cuts in 2024.

US Gross Domestic Product (GDP) Annualized expanded by 3.4% in Q4, surpassing market expectations of remaining unchanged at a 3.2% increase. US Core Personal Consumption Expenditures (QoQ) for the same period came in at 2.0%, slightly below the expected and previous reading of 2.1%.

The Canadian Dollar (CAD) received a boost due to increased prospects of foreign currency inflows, fueled by the uptick in West Texas Intermediate (WTI) oil prices. The rise in Crude oil prices is linked to expectations that the Organization of the Petroleum Exporting Countries and its allies (OPEC+) will continue their production cuts.

Canada's Gross Domestic Product (MoM) expanded by 0.6% in January, surpassing the projected 0.4% increase. This indicates economic resilience and suggests a strengthening economic landscape. These figures have instilled confidence in Canada's economic outlook, dampening market expectations of immediate rate cuts by the Bank of Canada (BoC).

USD/CAD has edged slightly higher to retest the 1.3600+ area. Economists at Scotiabank analyze the pair’s outlook.

USD’s latest push above the 1.3600 area appears to have stalled out again

• USD/CAD pushes higher on USD strength after Fed officials advocate caution in cutting interest rates. 
• Oil remains bid despite higher inventories as official government figures moderate previous data. 
• BoC could turn dovish at the next meeting on lower inflation and negative growth outlook. 

USD/CAD continues channeling higher, up by almost a tenth of a percent and trading above 1.3600 on Thursday. The pair is benefiting from a general appreciation in the US Dollar (USD) on the back of expectations the Federal Reserve (Fed) will delay cutting interest rates, a key driver of FX markets. 

US Dollar versus Canadian Dollar: 4-hour chart

The outlook for Canada’s largest export Crude Oil, has hampered the Canadian Dollar (CAD) meanwhile, after a surprise rise in US stockpile data denoted flagging demand. Although WTI Oil is rising on Thursday – due to a more official source of stockpile data from the Energy Information Administration (EIA) moderating the initial data – Crude’s outlook remains uncertain. 

Fed officials caution against hasty rate cuts 

Overall stronger growth data and stickier-than-expected inflation in the US have led a series of Fed speakers to question whether the conditions are right for a rate cut in June. With interest rates now expected to remain higher for longer, the US Dollar (USD) has gained a boost, since higher interest rates tend to attract greater inflows of foreign capital. 

Policymakers in Canada have been less vocal about cutting interest rates and at the last Bank of Canada (BoC) meeting BoC Governor Tiff Macklem said it was still too early to consider cutting interest rates as more time was needed to ensure inflation had come down to the BoC’s 2.0% target. 

BoC may change tone

The divergence in policy stances between the two central banks would normally be expected to favor the Canadian Dollar over the US Dollar (bearish for USD/CAD), however, since Maclem spoke, Canadian inflation data for February has shown a fairly steep drop. 

The core Consumer Price Index, which is the metric most central banks favor for targeting price stability, fell to 2.1% YoY in February, from 2.4% in January, placing it just a tenth of a percent above the BoC’s target, according to data from Statistics Canada. 

Headline inflation also slowed to 2.8% from 2.9% and undershot expectations of 3.1%. The cooling inflation data suggests the BoC could shift their stance from its current “mute” setting at the next policy meeting on April 10. 

Apart from disinflation there may be other reasons why the BoC may feel a need to start cutting interest rates. Canada’s economy is in comparatively worse shape than the US’s and it could do with the panacea of lower interest rates to help stimulate activity. 

Canada’s  GDP growth rate is slower, it has higher unemployment and – in the words of BoC Assistant Deputy Governor Carolyn Rogers – suffers from “low productivity” and “poor levels of investment”. 

In addition, the BoC’s policy rate is lower at 5.0% than the fed funds rate of 5.25%-5.50%, a differential which mildly favors the US Dollar over the CAD.

• USD/CAD gains some positive traction on Thursday, though the upside remains capped.
• The Fed’s projected three rate cuts in 2024 caps the upside for the USD and the major.
• An uptick in Oil prices underpins the Loonie and contributes to keeping a lid on the pair.

The USD/CAD pair attracts some buyers during the Asian session on Thursday and for now, seems to have snapped a three-day losing streak, albeit lacks follow-through. Spot prices remain below the 1.3600 mark as traders look to important macro data from the US and Canada for some meaningful impetus.

Thursday's economic docket highlights the release of the monthly Canadian GDP report, along with the final US Q4 GDP print. Apart from this, the usual Initial Weekly Jobless Claims, Pending Home Sales and the revised Michigan Consumer Sentiment Index might influence the US Dollar (USD), which might produce short-term trading opportunities around the USD/CAD pair. The focus, however, remains glued to the US Personal Consumption Expenditures (PCE) Price Index on Friday.

In the meantime, the overnight hawkish remarks by Federal Reserve (Fed) Governor Christopher Waller cooled rate cut hopes and pushed the USD back closer to the monthly peak, lending some support to the USD/CAD pair. The Fed, however, projected a less restrictive policy going forward and indicated that it remains on track to cut interest rates by 75 basis points in 2024. This is holding back the USD bulls from placing aggressive bets and acting as a headwind for the currency pair.

Meanwhile, Crude Oil prices gain some follow-through traction in the wake of worries about tighter global supply amid lower Russian production. Furthermore, the Israel-Hamas conflict has shown little signs of de-escalation, which continues to fuel concerns about supply disruptions from the Middle East and lends additional support to the black liquid. This, in turn, is seen underpinning the commodity-linked Loonie and contributing to capping the upside for the USD/CAD pair.

• USD/CAD could gain grounds on risk aversion ahead of US PCE due on Friday.
• WTI oil price depreciates as the API Weekly Crude Oil Stock increased.
• The expectations of the US Fed initiating rate cuts could weaken the US Dollar.

USD/CAD halts its two-day losing streak, edging higher to near 1.3590 during the Asian session on Wednesday. The US Dollar (USD) is exhibiting strength, while lower Crude oil prices are contributing to downward pressure on the Canadian Dollar (CAD). This dynamic is bolstering the USD/CAD pair.

Western Texas Intermediate (WTI) oil price edges lower to near $80.70, by the press time. This decline in WTI price is attributed to the increase in API Weekly Crude Oil Stock for the week ending on March 22, with 9.337 million barrels against the previous decrease of 1.519 million barrels.

Bank of Canada (BoC) Senior Deputy Governor Carolyn Rogers has cautioned about Canada's low productivity resulting from inadequate investment, competition, and the underutilization of skills among new Canadians. Additionally, Rogers has highlighted concerns that the current inflation situation could pose a more significant threat than it has in recent decades.

The US Dollar Index (DXY) experienced its second consecutive day of gains amid a risk-off sentiment, driven by anticipation surrounding the upcoming release of US Personal Consumption Expenditures (PCE) scheduled for Friday. However, the decline in US Treasury yields may be attributed to the expectations surrounding the US Federal Reserve (Fed) regarding potential rate cuts. This sentiment could potentially limit the advances of the US Dollar.

Atlanta Fed President Raphael Bostic has expressed his expectation for just one rate cut this year, cautioning against reducing rates prematurely due to the potential for increased disruption. On the other hand, Chicago Fed President Austan Goolsbee aligns with the majority of the board, anticipating three cuts.

• USD/CAD drops to 1.3550 as the Fed’s belief that the underlying story of inflation easing is intact weighs on the US Dollar.
• The US Durable Goods Orders remained stronger than expected in February.
• BoC Rogers worries about Canada’s low productivity.

The USD/CAD pair falls to 1.3550 in the early American session on Tuesday. The Loonie asset faces pressure as the US Dollar drops on firm expectations that the Federal Reserve (Fed) will start reducing interest rates from the June meeting.

The Fed’s confidence in the fundamental story of inflation—that it will return to the 2% target despite hot readings in January and February—has boosted expectations for rate cuts in June. This has improved market sentiment, which has strengthened demand for risk-sensitive assets.

The S&P 500 opens on a positive note, portraying an increase in market participants' risk appetite. The US Dollar Index (DXY) falls to 104.15 from its monthly high of 104.50 despite upbeat US Durable Goods Orders for February. The US Census Bureau reported that orders for Durable Goods rose by 1.4% against expectations of 1.3%.

The Census Bureau said an increase in primary metals, transportation equipment, and machinery drove higher fresh durable goods orders. Higher spending in factories indicates a revival of the manufacturing sector, which has remained a main laggard due to the Federal Reserve's hefty rate hikes in more than two years.

This week, investors will keenly focus on the US core Personal Consumption Expenditure price index (PCE) data for February, which will be published on Friday. Fed’s preferred inflation measure will provide fresh cues about when the central bank will start reducing interest rates.

Meanwhile, the Canadian Dollar could face selling pressure as Bank of Canada (BoC) Senior Deputy Governor Carolyn Rogers has depicted vulnerable economic prospects. BoC Rogers warned about Canada’s low productivity due to a lack of investment, competition, and the inability of new Canadians to use their skills.

Carolyn Rogers also warned that the current inflation situation could be a bigger threat than it has been over the past few decades.

USD/CAD drifts a little lower. Economists at Scotiabank analyze the pair’s outlook.

Resistance is seen at 1.3600/1.3610

See – EUR/USD: Move above 1.0872 liable to spur additional gains to 1.0900+ – Scotiabank

• USD/CAD is moving lower within an ascending channel after almost touching the highs. 
• The MACD has crossed its signal line, giving a sell signal. 
• Heavy support lies at 1.3500 from a confluence of major moving averages. 

USD/CAD is in a steady short-term uptrend, with the exchange rate rising within an ascending channel. 

The pair recently reached the vicinity of the upper borderline of the channel before rolling over and beginning a decline. Its descent continues. 

US Dollar to Canadian Dollar: 4-hour chart

The reversal lower is supported by a bearish crossover of the Moving Average Convergence/ Divergence (MACD) indicator, providing a corresponding sell signal (circled). The MACD is especially reliable at marking turns within a range or channeling market environment. 

Despite the strength of the latest up leg and the overall bullish bias, price is moving lower as bears take over. 

US Dollar to Canadian Dollar: Daily chart

It is quite possible USD/CAD will continue falling to a confluence of two major moving averages – the 50-day and 100-day Simple Moving Averages (SMA) situated at around 1.3500. 

• USD/CAD faced challenges due to lower US Treasury yields on Tuesday.
• The lower WTI price could contribute to pressure on the Canadian Dollar.
• Greenback could struggle on market expectations of the Fed commencing an easing cycle.

USD/CAD trims intraday losses but remains in the negative zone, which could be attributed to an improved US Dollar (USD). The USD/CAD pair edges lower to 1.3580 during the Asian trading hours on Tuesday.

Additionally, the decline in Crude oil prices could have provided pressure to undermine the Canadian Dollar (CAD), reinforcing the USD/CAD pair. West Texas Intermediate (WTI) oil price edges lower to near $81.70 per barrel, by the press time. However, oil prices strengthened after the United States Energy Information Administration (EIA)increased its forecast prices for Crude oil and petroleum products for the remainder of 2024.

Moreover, the Canadian Dollar (CAD) encountered downward pressure following indications from the Bank of Canada (BoC) of possible rate cuts in 2024, as revealed in its latest meeting minutes. Deputy Governor Toni Gravelle reiterated the central bank's commitment to completing quantitative tightening by 2025, underscoring its sustainability amid incremental interest rate decreases. Investors are likely to await the release of Canadian Gross Domestic Product (GDP) data for January, scheduled for Thursday, which could further impact market sentiment.

The US Dollar Index (DXY) attempts to retrace its recent losses, inching higher to near 104.20, by the press time. However, the decline in the US Treasury yields, which could have put pressure on the US Dollar. Market sentiment is leaning towards expectations of the Federal Reserve (Fed) commencing an easing cycle, with speculations pointing towards a potential start in June. Traders will likely watch Consumer Confidence for February on Tuesday.

Atlanta Fed President Raphael Bostic anticipates only one rate cut this year, emphasizing the potential for increased disruption if rates are reduced prematurely. Conversely, Chicago Fed President Austan Goolsbee aligns with the majority of the board, foreseeing three cuts. However, Goolsbee emphasizes the importance of additional evidence showing a decline in inflation before advocating for rate cuts.

USD/CAD gains stall around 1.3600. Economists at Scotiabank analyze the pair’s outlook.

Price action is bearish

• USD/CAD attempts to continue its winning streak on Monday.
• Fed member Bostic forecasted only one interest rate cut instead of his earlier projection of two rate cuts in 2024.
• The higher WTI price might have provided support for the Canadian Dollar.

USD/CAD maintains its position in positive territory after paring back some gains on Monday. The pair trades higher around 1.3600 during the Asian trading session, following hawkish remarks from Federal Reserve Bank of Atlanta President Raphael Bostic on Friday. Bostic adjusted his earlier projection of two interest rate cuts this year, now forecasting only one, citing persistent inflation and stronger-than-expected economic indicators.

Moreover, the Canadian Dollar (CAD) faced downward pressure as the Bank of Canada (BoC) hinted at potential rate cuts in 2024 in its latest meeting minutes. Deputy Governor Toni Gravelle reaffirmed the central bank's intention for quantitative tightening to conclude by 2025, highlighting its sustainability amidst gradual interest rate reductions.

The CAD receives support from higher Crude oil prices, which in turn limits the losses of the USD/CAD pair. Additionally, better-than-anticipated Canadian Retail Sales data might have contributed to bolstering the Canadian Dollar.

The US Dollar Index (DXY) declines to near 104.40 as the 2-year and 10-year yields on US Treasury bonds hold at 4.60% and 4.21%, respectively, at the time of reporting. Despite the uptick in US Treasury yields, the US Dollar (USD) fails to find support.

Federal Reserve Chair Jerome Powell mentioned during a press conference, that an unexpected increase in unemployment could prompt the central bank to consider reducing interest rates. Powell also reassured markets that the Federal Reserve would not hastily react to consecutive months of heightened inflation figures.

Market participants will likely monitor the release of Gross Domestic Product (GDP) data for the fourth quarter of 2023 from the United States (US). Additionally, attention will be on Canadian GDP data for January, scheduled for release on Thursday.

• USD/CAD climbs to 1.3570 amid firm US Dollar.
• The appeal for the US Dollar strengthens on upbeat US economic outlook.
• The Canadian Dollar weakens as BoC rate cut bets escalate.

The USD/CAD pair jumps to 1.3570 in the early New York session on Friday. The Loonie asset advances as appeal for the US Dollar strengthens on expectations that the Federal Reserve (Fed) needs not to rush for rate cuts.

The consumer price inflation in the United States economy is sticky and the US economic outlook is upbeat due to robust consumer spending and steady labor market conditions. This allows the Fed to observe more data for months before shifting to rate cuts.

This has dampened market sentiment. S&P 500 opens on a slightly bearish note amid caution that the Fed will not start reducing interest rates until it gains greater confidence that inflation will decline to the desired rate of 2%. The US Dollar Index (DXY), which tracks the value of the US Dollar against six major currencies, refreshes monthly high at 104.44.

Meanwhile, the Canadian Dollar weakens on expectations that the Bank of Canada (BoC) will start reducing interest rates. The speculation over BoC rate cuts deepen as the consumer price inflation for February remains softer than expectations.

In February, the annual headline Consumer Price Index (CPI) grew at a slower pace of 2.8% than expectations of 3.1% and the former reading of 2.9%. On a monthly basis, the headline CPI rose by 0.3% against the expectation of 0.6%. The Bank of Canada’s (BoC) preferred inflation measure, which strips of eight volatile items grew at a steady pace of 0.1% on a month-on-month basis. The underlying inflation decelerated to 2.1% from 2.4% in January.

USD/CAD’s solid rebound from the mid-1.3400 area is extending. Economists at Scotiabank analyze the pair’s outlook.

There is little reason to expect gains to stop here

See: USD/CAD could head higher towards 1.3730 once a break above 1.3620 materializes – SocGen

USD/CAD rebound has stalled after approaching the December high of 1.3620. Economists at Société Générale analyze the pair’s technical outlook.

1.3440 is important support

• USD/CAD marches toward 1.3600 amid renewed US Dollar’s strength.
• The US economy exhibits a firm footing on the grounds of labor market and consumer spending.
• Expectations for BoC lowering interest rates sooner escalate due to easing price pressures.

The USD/CAD pair rises to 1.3570 in Friday’s European session on a buoyant US Dollar. The Loonie asset is expected to continue its upside move as the appeal for safe-haven assets remains upbeat.

The US Dollar Index (DXY) rose to a fresh two-week high at 104.20 on upbeat Existing Home Sales data for February, released on Thursday. Sales of pre-owned residences rose by 4.38 Million, the most in a year, against expectations of 3.94 Million and the prior reading of 4.00 Million. This demonstrates improving United States economic prospects despite interest rates remaining historically high in the range of 5.25%-5.50%.

Compared with other developed economies, the US economic outlook is stronger due to robust consumer spending and upbeat labor market conditions. The Federal Reserve (Fed) is not expected to rush for rate cuts as inflation remains higher than expected in February, strengthening the US Dollar.

Meanwhile, price pressures in the Canadian economy are decelerating at a faster pace, boosting expectations for the Bank of Canada (BoC) to reduce interest rates sooner.

USD/CAD approaches the horizontal resistance of the Ascending Triangle pattern formed on a daily timeframe, plotted from December 7 high at 1.3620. The upward-sloping border of the aforementioned pattern is placed from December 27 low at 1.3177. The chart pattern exhibits a sharp volatility contraction.

The near-term appeal is bullish as the 20-day Exponential Moving Average (EMA) near 1.3520 continues to provide support to the US Dollar bulls.

The 14-period Relative Strength Index (RSI) oscillates inside the 40.00-60.00 range, indicating indecisiveness among investors.

The Loonie asset would observe a fresh upside if it breaks above December 7 high at 1.3620. This will drive the asset towards May 26 high at 1.3655, followed by the round-level resistance of 1.3700.

On the flip side, a downside move below February 22 low at 1.3441 would expose the asset to February 9 low at 1.3413. A breakdown below the latter would extend downside towards January 15 low at 1.3382.

USD/CAD daily chart

• USD/CAD trades in negative territory around 1.3523 amid the softer USD. 
• The US S&P Global Manufacturing PMI increased to 52.5 in March vs. 52.2 prior, stronger than expected. 
• The Bank of Canada expects to begin cutting interest rates this year, although policymakers vary on the precise timing. 

The USD/CAD pair trades on a weaker note above the 1.3500 mark during the early Asian trading hours on Friday. The decline of the US Dollar (USD) below the 104.00 mark weighs on the pair. At the press time, USD/CAD is trading at 1.3523, losing 0.05% on the day. 

The Federal Reserve (Fed) held steady on interest rates at its March meeting on Wednesday and maintained its forecast for three interest rate cuts this year. During a press conference, Fed Chair Jerome Powell noted that a strong jobs market wouldn’t deter the central bank from cutting rates. 

On Thursday, the US S&P Global Manufacturing PMI increased to 52.5 in March from 52.2 in February, above the estimation of 51.7. The Services PMI eased to 51.7 in March from the previous reading of 52.3, below the market, consensus of 52.0. Finally, the Composite PMI arrived at 52.2 in March versus 52.5 prior.  

On the Loonie front, the Bank of Canada (BoC) Summary of Deliberations from its March meeting showed that the governing council agreed that if the economy continues to evolve “in line with the Bank’s projection, the conditions for rate cuts should materialize over the course of this year. However, the timing of rate cuts remains uncertain. The BoC Governor Tiff Macklem said the central bank did not want to move too quickly, only to have to reverse course later.

Moving on, the Canadian Retail Sales for January is due on Friday, which is estimated to decline by 0.4% MoM. The Fed Chair Jerome Powell and Michael Barr are set to speak on Friday.

USD/CAD is steady on Thursday. Economists at Scotiabank analyze the pair’s outlook.

Short-term spot trends are somewhat mixed