USD/CAD rebounds from multi-month low, upside potential seems limited

USD/CAD gains some positive traction on Wednesday, albeit lacks follow-through buying.
Bullish Crude Oil prices, along with stronger Canadian CPI, continue to benefit the Loonie.
Fed rate cut bets and the risk-on mood undermine the USD and cap the upside for the pair.

Haresh Menghani FXStreet

The USD/CAD pair stages a modest bounce from its lowest level since August 4, around the 1.3330 area touched earlier during the Asian session on Wednesday and recovers a part of the previous day's Canadian CPI-inspired losses. Spot prices currently trade just below mid-1.3300s, up 0.10% for the day, though any meaningful appreciating move still seems elusive.

Data released on Tuesday showed that the annual consumer inflation rate in Canada unexpectedly held steady at 3.1% in November, prompting traders to trim their bets as to when the Bank of Canada (BoC) would start cutting interest rates. This, along with the recent goodish recovery in Crude Oil prices from the lowest level since late June touched earlier this month, might continue to underpin the commodity-linked Loonie. Apart from this, the underlying bearish sentiment surrounding the US Dollar (USD) might further contribute to capping the USD/CAD pair.

The Federal Reserve (Fed) took a dovish turn last week and projected an average of three 25 bps rate cuts in 2024. This, along with the prevalent risk-on environment, keeps the safe-haven Greenback closer to over a four-month low touched last Friday. Meanwhile, a slew of influential Fed officials recently attempted to downplay speculations about an imminent dovish shift in the US central bank's policy stance, albeit did little to impress the USD bulls. This, in turn, validates the negative outlook for the USD/CAD pair and warrants some caution for bullish traders.

Market participants now look to the US economic docket, featuring the release of the Conference Board's Consumer Confidence Index and Existing Home Sales data. This, along with Chicago Fed President Austan Goolsbee's appearance, will drive the USD demand later during the North American session and provide a fresh impetus to the USD/CAD pair. Apart from this, Oil price dynamics should allow traders to grab short-term opportunities. The focus, however, will remain glued to the US Core PCE Price Index – the Fed's preferred inflation gauge – due on Friday.

Technical levels to watch

USD/CAD

Overview
Today last price	1.3347
Today Daily Change	0.0011
Today Daily Change %	0.08
Today daily open	1.3336

Trends
Daily SMA20	1.3548
Daily SMA50	1.3663
Daily SMA100	1.36
Daily SMA200	1.3507

Levels
Previous Daily High	1.3402
Previous Daily Low	1.3333
Previous Weekly High	1.3619
Previous Weekly Low	1.335
Previous Monthly High	1.3899
Previous Monthly Low	1.3541
Daily Fibonacci 38.2%	1.3359
Daily Fibonacci 61.8%	1.3375
Daily Pivot Point S1	1.3312
Daily Pivot Point S2	1.3289
Daily Pivot Point S3	1.3244
Daily Pivot Point R1	1.338
Daily Pivot Point R2	1.3425
Daily Pivot Point R3	1.3448

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

EUR/USD keeps the rangebound trade near 1.1850

EUR/USD is still under pressure, drifting back towards the 1.1850 area as Monday’s session draws to a close. The modest decline in spot comes as the US Dollar picks up a bit of support, while thin liquidity and muted volatility, thanks to the US market holiday, are exaggerating price swings and keeping trading conditions choppy.

GBP/USD flirts with daily lows near 1.3630

GBP/USD has quickly given back Friday’s solid gains, turning lower at the start of the week and drifting back towards the 1.3630 area. The focus now shifts squarely to Tuesday’s UK labour market report, which is likely to keep the quid firmly in the spotlight and could set the tone for Cable’s next move.

Gold sticks to a negative bias below $5,000; lacks bearish conviction

Gold remains depressed for the second consecutive day and trades below the $5,000 psychological mark during the Asian session on Tuesday, as a positive risk tone is seen undermining safe-haven assets. Meanwhile, bets for more interest rate cuts by the Fed keep a lid on the recent US Dollar bounce and act as a tailwind for the non-yielding bullion, warranting caution for bearish traders ahead of FOMC minutes on Wednesday.

AI Crypto Update: Bittensor eyes breakout as AI tokens falter

The artificial intelligence (AI) cryptocurrency segment is witnessing heightened volatility, with top tokens such as Near Protocol (NEAR) struggling to gain traction amid the persistent decline in January and February.

US CPI is cooling but what about inflation?

The January CPI data give the impression that the Federal Reserve is finally winning the war against inflation. Not only was the data cooler than expected, but it’s also beginning to edge close to the mystical 2 percent target. CBS News called it “the best inflation news we've had in months.”

XRP steadies in narrow range as fund inflows, futures interest rise

Ripple is trading in a narrow range between $1.45 (immediate support) and $1.50 (resistance) at the time of writing on Monday. The remittance token extended its recovery last week, peaking at $1.67 on Sunday from the weekly open at $1.43.