- The USD/CAD advances thanks to the drop in oil prices, the recovery of the Dollar and the neutral bets of the BoC.
- The Bank of Canada is expected to keep interest rates unchanged at 5%.
- USD/CAD is approaching the top of the ascending channel chart pattern in an attempt to make a breakout.
USD/CAD has rallied strongly so far on Wednesday, advancing more than 50 pips to recently hit new three-week highs at 1.3783. The Canadian dollar capitalizes on expectations that the Bank of Canada (BoC) will keep interest rates unchanged at 5% for the second time in a row.
In addition to expectations of a BoC pause, a strong recovery in the US dollar following a rebound in US business activities has given strength to the pair. The dollar rebounded on Tuesday after S&P Global reported a rise in manufacturing and services PMI in October, amid strong consumer spending despite the Federal Reserve raising interest rates ( Fed).
The price of oil underwent a major correction as investors hoped that the war between Israel and Hamas could be contained. Several countries urge Israel to rethink the consequences of the ground attack on Gaza, which could cause a deep shock to the world economy. It should be noted that Canada is the main oil exporter to the United States and the drop in oil prices has an impact on the Canadian dollar.
USD/CAD is approaching the top of the hourly ascending channel chart pattern in an attempt to break higher. The CAD is approaching horizontal resistance drawn from October 5 high at 1.3784. The ascending 50-period EMA at 1.3720 guarantees further upside.
The Relative Strength Index (RSI) (14) is moving into the bullish range of 60.00-80.00, indicating that bullish momentum has been activated.
A decisive break above the March 24 high around 1.3800 would expose USD/CAD to the March 10 high at 1.3860, followed by the round-level resistance at 1.3900.
In an alternative scenario, a break below the September 25 low around 1.3450 would drag the asset towards the September 20 low near 1.3400. A bigger break could expose the asset to six-week lows near 1.3356.
USD/CAD Hourly Chart
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Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
