- US Dollar remains underpinned by a hawkish Federal Reserve 0.50% rate hike.
- The Federal Funds rate is expected to peak at around 5.10%, per the SEP dot plot.
- USD/CAD: The uptrend is intact, though a clear break above 1.3700 could expose the YTD high of 1.3977.
The USD/CAD rebounds around the 20-day Exponential Moving Average (EMA) and climbs more than 100 pips on Thursday, following the last Federal Reserve (Fed) meeting, which witnessed a 50 bps rate hike to the 4.25-4.50% range Wednesday. Therefore, the US Dollar (USD) stages a comeback after the Canadian Dollar (CAD) pushed the pair toward its weekly lows of around 1.3518. At the time of writing, the USD/CAD is trading at 1.3670, above its opening price by 0.92%.
Federal Reserve's officials to lift rates at around 5%
US equities remain on the defensive as investors assess the Fed’s increase in borrowing costs. In the last meeting of the year, the Fed hiked rates and updated its September projection, including an upward revision of the Federal Funds rate (FFR). Policymakers expect the FFR to sit at around 5.1% through 2023, pushing back investors’ speculations for a Fed pivot, even though money markets are pricing in the first rate cut by December of 2023, according to Eurodollar futures, after an estimated peak of the FFR around 5%.
Delving into the Summary of Economic Projections (SEP), the US Gross Domestic Product (GDP) for 2022 is projected at 0.5% and in 2023 at 0.5%, while inflation is expected to fall to 3.5% in 2023 and will hit 2.1% by 2025.
Aside from this, the US economic docket featured November Retail Sales, which took an unexpected dive from -0.1% to a contraction of 0.6% MoM. On the other hand, Initial Jobless Claims came in lower than anticipated - a sign of strength within the labor market affirmed by Fed Chair Powell’s remarks this week.
After an initial decrease of 0.1% in October, US Industrial Production continued to shrink by a further 0.2%, making it two months of decline consecutively – something not seen since 2009’s recessionary period. The Capacity Utilization rate eased from October’s 79.9% to 79.7% in November.
The US Dollar Index (DXY), which tracks the American Dollar value against a basket of six currencies, soar sharply, up by 1.02% at 104.673. Meanwhile, falling oil price, led by the Western Texas Intermediate (WTI), is dropping 0.92%, at $76.69, a headwind for the Canadian Dollar.
USD/CAD Price Analysis: Technical outlook
Although the USD/CAD uptrend remains intact, it should be said that the ongoing rally could halt at around the 1.3689/1.3700 area. However, the Relative Strength Index (RSI) and the Rate of Change (RoC) suggest that buyers are gathering momentum, but a decisive breach above 1.3700 Is needed, so the USD/CAD might test higher prices.
Therefore, the USD/CAD key resistance levels are 1.3700, followed by November’s 3 high of 1.3808, ahead of the YTD high of 1.3977.
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
Editors’ Picks

EUR/USD recovers toward 1.0500 after mixed US PMI data
EUR/USD rebounds toward 1.0500 in the American session on Friday after the data from the US showed that the business activity in the private sector expanded at a softer pace than anticipated in early February. The pair remains on track to end the week with little changed.

GBP/USD rises above 1.2650, looks to post weekly gains
GBP/USD regains its traction and trades above 1.2650 in the second half of the day on Friday. The data from the US showed that the S&P Global Services PMI dropped into the contraction territory below 50 in February, causing the US Dollar to lose strength and helping the pair edge higher.

Gold holds above $2,930 as US yields edge lower
Gold holds above $2,930 after correcting from the record-high it set above $2,950 on Thursday. Following the mixed PMI data from the US, the benchmark 10-year US Treasury bond yield stays in negative territory below 4.5% and allows XAU/USD to hold its ground.

Crypto exchange Bybit hacked for $1.4 billion worth of ETH
Following a security breach first spotted by crypto investigator ZachXBT, crypto exchange Bybit announced that it suffered a hack where an attacker compromised one of its ETH wallets.

Money market outlook 2025: Trends and dynamics in the Eurozone, US, and UK
We delve into the world of money market funds. Distinct dynamics are at play in the US, eurozone, and UK. In the US, repo rates are more attractive, and bills are expected to appreciate. It's also worth noting that the Fed might cut rates more than anticipated, similar to the UK. In the eurozone, unsecured rates remain elevated.

The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.