USDCAD Outlook Amidst Diverging Central Bank Policies

📈 Eyes on USDCAD as central bank policies diverge! With Canada hinting at rate cuts amidst rising unemployment and the US Fed cautious amid inflation spikes, traders anticipate potential upsides towards 1.3900. 🚀 #Forex #Trading #USDCAD #CentralBanks #EconomicIndicators

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USDCAD Outlook Amidst Diverging Central Bank Policies

All eyes are on the USDCAD pair following a decisive breach of the critical 1.3600 resistance level. The dynamics shaping this currency pair are intricately tied to contrasting monetary policies and economic indicators emanating from both sides of the border.

On the Canadian front, Bank of Canada Governor Macklem hinted at the possibility of interest rate cuts, citing concerns over rising unemployment figures, which surged to 6.1% in March.

Despite inflation hovering comfortably within the target range of 2-3%, the upcoming release of the Consumer Price Index (CPI), forecasted to climb to 0.7% from 0.3%, could provide impetus for such a move.

Conversely, south of the border, the US Federal Reserve is grappling with a different narrative. Inflationary pressures, as evidenced by a surge to 3.5%, have prompted a cautious stance on rate cuts.

Despite earlier expectations of a June cut, the Fed has now postponed this action to July, although market indicators suggest a 38.3% probability of a cut, according to the CME Fed Watch Tool.

The robust labor market, with March witnessing the creation of 303k jobs, further complicates the Fed’s decision-making process, as a strong labor market often stokes inflation fears through increased consumer spending.

This divergence in monetary policy between the two central banks presents a compelling narrative for traders eyeing opportunities in the USDCAD pair.

With the potential for a dovish stance from the Bank of Canada juxtaposed against the cautious approach of the Federal Reserve, the path for the USDCAD seems primed for a potential ascent towards the weekly range highs of 1.3900.

USDCAD

The price on the chart has traded through multiple technical levels and some observations included:

• USDCAD broke through the key resistance of 1.3600. Now the price has broken this level it could revisit the weekly range highs. 
• Support can be seen around the key level of 1.3700.

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About The Author

Jonathan Kibbler

Jon Kibbler, our Senior Market Analyst, boasts over a decade of trading experience. He specializes in dissecting the intricacies of financial markets and sharing his expertise with precision. Jon’s insights have been featured at renowned events and platforms like Coindex, Forex Analytix, and Forex.com.

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