USD/CAD Bulls Raise But Face Pressure Below Key Resistances

• USD/CAD is under pressure below 1.3440/50 and trend line resistance.
• The FOMC Minutes will dictate the direction of the dollar.

the canadian dollar it weakened on Wednesday against the dollar and all other G10 currencies on falling oil prices. USD/CAD rose 0.3%, having ranged from a low of 1.3356 to a high of 1.3440 so far on the day, pending a parliamentary appearance by Bank of Canada Governor Tiff Macklem and the minutes of the Federal Open Market Committee.

The Loonie came under pressure despite the US dollar falling following the release of a series of US economic data (including Durable Goods Orders, PMIs, Claims, New Home Sales and Final Sentiment). of Michigan). The data, for the most part, was strong, but the emphasis was on the shocking US Manufacturing PMI result, which missed expectations:

However, the price of oil plunged lower on Wednesday as China continues to battle rising Covid-19 infections, imposing lockdown measures and mass testing, reducing economic growth and demand for oil from the world’s leading importer. At the same time, the European Union is preparing to impose a price cap on Russian oil exports. In addition, a report showed a larger-than-expected drop in US inventories.

In addition to the FOMC Minutes, Bank of Canada Governor Tiff Macklem and Senior Deputy Governor Carolyn Rogers will appear before the House of Commons Standing Committee on Finance at 16:30 ET (21:30 GMT). .

FOMC minutes in the spotlight

Today’s PMI data has given dollar bears an edge ahead of the release of the FOMC minutes. First, recent worse than expected US consumer price data has already created sentiment of a Fed pivot and investor hopes that the central bank may be in a position to moderate your rate of climbs. The above statement read : “In determining the pace of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy. aria the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.”

This statement led to volatility in the markets, as investors positioned themselves in favor of a softer approach from the Fed, which Chairman Jerome Powell countered in his press conference by suggesting that there will probably be a higher terminal rate. We expect the minutes of the November FOMC meeting to shed more light on the FOMC’s deliberations regarding the expected slowing of the pace of rate hikes in upcoming meetings,” analysts at TD Securities said.

“But above all, we hope that the minutes will place a lot of emphasis on the probability that the terminal rate will end up being higher than initially forecast.” The Fed still needs to tighten the labor market to align growth in wages and household spending with rates more consistent with the inflation target.”

In such a scenario, this could put a bid on the US dollar that has fallen prior to the event. However, the USD/CAD is behind the trend line and below a covering pattern on the daily charts, as illustrated below:

USD/CAD Technical Analysis

The pair has broken out of the trend line this month and has corrected back into resistance with prospects for a continuation to the downside as illustrated on the hourly chart below as well: