USD/CAD climbs, closing into 1.2700 as Biden reappoints Fed Jerome Powell

• USD/CAD rallies as Jerome Powell renomination seems that would be a continuation in the Fed monetary policy.
• The US Dollar Index climbs to 16-month  new highs, above 96.40.
• An absent economic data from Canada keep investors focused on the dynamics around the US economy.

The USD/CAD begins the week on the right foot, advances during the New York session, trading at 1.2680 at the time of writing. In the overnight session, the greenback was steady. However, in the last hour, it is rallying as US President Joe Biden reappointed Federal Reserve Chairman Jerome Powell for a second term. Also, nominated Lael Brainard, the other candidate, to a Vice-Chairman role.

US Dollar advances as Fed Chairman Powell got renominated

Meanwhile, the US Dollar Index, which tracks the greenback’s performance against a basket of six rivals, advances 0.39%, sitting at 96.44, its highest level reached since July 2020, underpinned by rising US bond yields, as the market sees the reappointing of Powell as a continuation to the current monetary policy.

Further, in the last couple of weeks, investors seem convinced that the Fed will hike rates by the middle of 2022. Powell renomination cemented those expectations as the US 10-year Treasury yield is up a half percent, closing onto the 1.60% threshold. Further, in the last week, Fed policymakers have expressed their interest in increasing the QE’s reduction pace, so the US central bank could have room to maneuver as inflation keeps posting new highs in subsequent months.

Also, the Loonie failed to capitalize on higher crude oil prices, as the Western Texas Intermediate (WTI) advances 0.71%, trading at $76.05, at press time.

An absent economic docket in Canada has weighed on the CAD, as investors focus on the US dollar dynamics. On the US front, the Chicago Fed National Activity Index for October rose 0.76, better than the September -0.18 reading.

Therefore, throughout this week, USD/CAD could appreciate. Robust US macroeconomic data on the last couple of weeks, and the Fed’s preferred gauge for inflation, the PCE, would be featured in the week. A higher reading could increase the chances of the US central bank acting to tackle elevated prices, thus boosting the greenback.

USD/CAD Price Forecast: Technical outlook

The USD/CAD is trading above Friday’s high at 1.2661, which now acts as support. The 1-hour chart depicts the pair’s upward bias, though it finds strong resistance at the R1 pivot point around 1.2681, retreating towards current levels. The 1-hour simple moving averages (SMA’s) reside below the spot price, so corrections lower in the near term could be viewed as buying opportunities for USD bulls.

Resistance levels are located at 1.2700. The confluence of a downslope trendline in the daily chart and the September 29 high at 1.2774 would be challenging to overcome on the way to 1.2800.

On the flip side, the first support would be the November 19 high at 1.2661, followed by the 100-SMA at1.2605.