- The Loonie maintains significant weekly losses of 2.04%.
- An upbeat market mood and broad US dollar strength lift USD/CAD.
- USD/CAD Price Forecast: A close above 1.3078 would pave the way for the October 2020 highs around 1.3389.
The USD/CAD spikes above 1.3000 for the first time since May 12 and hits a new year-to-date high of around 1.3078 following the US Federal Reserve’s 75 basis point rate hike on Wednesday, that traders weren’t caught off guard by a WSJ article on Monday that foresaw a surge of that magnitude. USD/CAD initially reacted lower to 1.2880, but it was seen as an opportunity for USD/CAD buyers, which pushed the pair higher. At the time of writing, the USD/CAD is trading at 1.3045, up 0.81%.
Overall dollar strength a tailwind for USD/CAD
The market mood remains upbeat as global equities trim some weekly losses. In the forex space, the mood is mixed, with all high-beta currencies down except for the New Zealand dollar and the British pound. In the safe-haven case, the yen is taking a hit after the Bank of Japan pledged to maintain its easing stance.
Meanwhile, the US dollar resumes its uptrend and gains 1.04%, trading at 104.877. US Treasury yields take a breather, particularly 10-year US Treasury yields, down eight basis points, yielding 3.224%.
As for the data, Canada’s Producer Price Index (PPI) for May was released, up 15%, down from the 16.4% reading but still higher. Commodity prices increased by 37.4% year-on-year, although down from 38.3% in April.
In the United States, May industrial production rose 5.8% year-on-year, below April’s reading, adding to signs of an economic slowdown.
Sources quoted by the WSJ said: “The rate at which everything is changing is quite alarming.” The sources added that the economy is still on fairly solid ground to withstand inflation, supply chain problems and rising interest rates.
Meanwhile, Neil Kashkari of the Minneapolis Fed said he supported 75 basis points in June and could support another in July. He added that a prudent strategy might be to continue with 50 basis point hikes. St. Louis Fed President James Bullard said a soft landing is possible if post-pandemic change is done right.
USD/CAD Price Forecast: Technical Outlook
With USD/CAD trading at new all-time highs, it is necessary to switch to the weekly chart to determine the future of the currency. Notably, USD/CAD is trading above the 200-week SMA, a strong bullish sign that could lift the pair towards October 2020 highs around 1.3390. However, USD/CAD is pulling back below the May 12 high at 1.3076.
A daily close below 1.3078 would open the door for further losses. That said, the first support for the USD/CAD would be the 1.3000 mark. Once broken, the next support would be the June 16 cycle low at 1.2860, followed by 1.2800.
Key technical levels
Source: Fx Street
With 6 years of experience, I bring to the table captivating and informative writing in the world news category. My expertise covers a range of industries, including tourism, technology, forex and stocks. From brief social media posts to in-depth articles, I am dedicated to creating compelling content for various platforms.
