USD/CAD rallies above 1.2800 on Powell hawkish remarks

• The USD/CAD reached a new weekly high at 1.2836.
• Fed’s Chair Powell: “Time to retire the word Transitory to inflation.”
• Jerome Powell favors a faster bond taper and would talk about speeding up the QE’s reduction on the next meeting.

The USD/CAD pair is rallying during the New York session, trading at 1.2820 at the time of writing. In the overnight session, the CAD had the upper hand against the greenback, amid a recovery in crude oil prices, after an overextended fall on Friday’s of last week that witnessed a drop of 12% in the day. Nevertheless, Moderna’s CEO comments that a drop in current COVID-19 vaccines efficacy spurred a spike from 1.2740 to 1.2790, ultimately gaining follow-through on Federal Reserve Chair Jerome Powell’s remarks during a hearing at the US Senate Committee on Banking and Housing.

Fed’s Chair Powell said that elevated prices are blamed on supply-demand issues, though reinforced that those increases have spread broadly. Furthermore, he noted that “risks” of higher inflation have increased and said it is time to retire the word “Transitory” when talking about inflation.

Powell added that it is “appropriate to consider wrapping up taper in a few months sooner” and said he would talk about speeding up the retirement of the bond purchasing pandemic stimulus in the next FOMC meeting.

When he was asked about the COVID-19 omicron variant, he said that he “will know within a week or 10 days, can only assess the impact on the economy then.”

The US macroeconomic docket so far featured the S&P/Case-Shiller Home Price Index (MoM) for September, which rose by 19,1%, more than the 19.3% expected. Meanwhile, the Chicago Purchasing Managers Index for November increased to 61.8, lower than the 67 estimated.

USD/CAD Price Forecast: Technical outlook

The USD/CAD 1-hour chart shows the pair has an upward bias, as confirmed by the hourly simple moving averages (SMA’s) with an upslope, residing below the spot price. At press time, the upward move triggered once Fed’s Powell said that it’s time to retire the Transitory word from inflation was capped around the R2 daily pivot point at 1.2822.

In the outcome of extending the rally, the first resistance would be the New York session daily high, reached at 1.2836, followed by the R3 daily pivot at 1.2852, followed by the figure at 1.2900.

On the other hand, the confluence of November 29 around the 1.2800 figure would be the first demand zone. A breach of the latter would expose the R1 daily pivot at 1.2780, followed by the 50-hour SMA at 1.2761.