USD/CAD bulls move in on dovish BoC and hawkish Fed sentiment


  • USD/CAD bulls are moving in despite the prior day's bearish close. 
  • The US Dollar has firmed on hawkish sentiment brewing around the Fed again and a dovish BoC. 

In this scenario, we have a 61.8% Fibonacci retracement level near 1.3350 below the neckline near 1.3380. However, given that the price is attempting to close higher for the day, that will leave an emphasis on the upside where eyes look to 1.3475. 

The Canadian Dollar is trapped between 1.3440 and 1.3420s, below a 2-½-month high of 1.326 that was scored at the start of the month.

The US Dollar continues with its relentless comeback as the markets fear that the Federal Reserve is not as close to a pivot as first presumed on the back of what was regarded as a dovish outcome from the Federal Reserve interest rate decision last week. At the same time, the Bank of Canada is expected to be the first major central bank to pause rate increases after delivering eight rate hikes in the past 11 months.

At the time of writing, USD/CAD is trading towards the highs of the day but the bears are present, chipping away as a key support structure of the consolidation of the day's highs. USD/CAD has travelled between a low of 1.3359 and 1.3444 so far and has been forced higher on a dovish sentiment at the Bank of Canada that has hiked its key interest rate to 4.5% in January, the highest level in 15 years.

Meanwhile, however, Governor Tiff Macklem said no further rate hikes would be needed if, as expected, the economy stalled and inflation fell. The summary of Governing Council deliberations were released today and they showed that policymakers decided to hike rates in January because of labour-market tightness and stronger-than-expected growth.

As for the US Dollar, it too is trapped up high following today's rally, testing the boundaries of 104 the figure and 103.00 on the downside as per the DXY index as investors paused selling the greenback, a day after Federal Reserve Chair Jerome Powell did not significantly change his US interest rate outlook. There is an air of nervousness considering a very strong US jobs report last week although the outlook remained tilted to the downside as the Fed nears the end of its tightening cycle.

The markets are trying to price in rate cuts by the end of the year, although Fed officials keep sounding the alarm over the prospects of higher for longer inflation, dependent on data which is fuelling a recovery in the greenback:

The bulls are in charge while above 103.00 but the price is testing the dynamic trendline support. If this were to give way, a bearish thesis can be drawn for a continuation lower below 103.00.

USD/CAD technical analysis

Meanwhile, USD/CAD is up high in the day's range but the bias is to the downside given the draw of the W-formation's neckline:                                        

The pattern is a reversion pattern and tends to pull the price toward the neckline for the restest of the support in that area. In this scenario, we have a 61.8% Fibonacci retracement level near 1.3350 below the neckline near 1.3380. However, given that the price is attempting to close higher for the day, that will leave an emphasis on the upside where eyes look to 1.3475. 

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended content


Recommended content

Editors’ Picks

EUR/USD struggles to hold above 1.0400 as mood sours

EUR/USD struggles to hold above 1.0400 as mood sours

EUR/USD stays on the back foot and trades near 1.0400 following the earlier recovery attempt. The holiday mood kicked in, keeping action limited across the FX board, while a cautious risk mood helped the US Dollar hold its ground and forced the pair to stretch lower. 

EUR/USD News
GBP/USD approaches 1.2500 on renewed USD strength

GBP/USD approaches 1.2500 on renewed USD strength

GBP/USD loses its traction and trades near 1.2500 in the second half of the day on Monday. The US Dollar (USD) benefits from safe-haven flows and weighs on the pair as trading conditions remain thin heading into the Christmas holiday.

GBP/USD News
Gold hovers around $2,610 in quiet pre-holiday trading

Gold hovers around $2,610 in quiet pre-holiday trading

Gold struggles to build on Friday's gains and trades modestly lower on the day near $2,620. The benchmark 10-year US Treasury bond yield edges slightly higher above 4.5%, making it difficult for XAU/USD to gather bullish momentum.

Gold News
Crypto Today: BTC hits new Trump-era low as Chainlink, HBAR and AAVE lead market recovery

Crypto Today: BTC hits new Trump-era low as Chainlink, HBAR and AAVE lead market recovery

The global cryptocurrency market cap shrank by $500 billion after the Federal Reserve's hawkish statements on December 17. Amid the market crash, Bitcoin price declined 7.2% last week, recording its first weekly timeframe loss since Donald Trump’s re-election. 

Read more
Bank of England stays on hold, but a dovish front is building

Bank of England stays on hold, but a dovish front is building

Bank of England rates were maintained at 4.75% today, in line with expectations. However, the 6-3 vote split sent a moderately dovish signal to markets, prompting some dovish repricing and a weaker pound. We remain more dovish than market pricing for 2025.

Read more
Best Forex Brokers with Low Spreads

Best Forex Brokers with Low Spreads

VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.

Read More

Forex MAJORS

Cryptocurrencies

Signatures