- USD/CAD is trading sideways below 1.3500, following the US Dollar.
- Waller said the central bank should not rush to cut rates.
- December Canadian retail sales were stronger than expected.
The USD/CAD pair has corrected to near 1.3480 in the European session on Friday, after failing to hold above the psychological resistance of 1.3500. The pair is boosted by the weakening of the US Dollar (USD). After a strong recovery, the DXY Dollar Index moves sideways, as investors await new guidance on interest rates from the Federal Reserve (Fed).
S&P 500 futures remain stagnant in the European session, indicating a calm mood in the markets. The DXY index remains near 104.00 despite Fed officials reiterating the need for more evidence to gain confidence that inflation will sustainably decline to the 2% target.
On Thursday, Fed Governor Christopher Waller said the risk of waiting for good inflation data is lower than the risk of acting too quickly in reducing rates. Waller is interested in watching the data for at least a couple of months to confirm whether January's inflation numbers were a blip or whether advancing price pressures are stalling.
Meanwhile, the Canadian Dollar (CAD) fails to capitalize on strong December retail sales data. Monthly retail sales grew at a strong pace of 0.9% versus expectations of 0.8% and stagnation in November. However, stubbornness in the inflation outlook has increased.
USD/CAD forms a shoulder-head-shoulder chart pattern on an hourly time frame, indicating a prolonged consolidation. Breaking the neck line drawn since February 9 at 1.3413 will lead to a bearish reversal.
The 50-period exponential moving average (EMA) is a major roadblock for US Dollar bulls. The 14-period Relative Strength Index (RSI) is between 40 and 60, indicating a sideways trend.
A sell-off could occur if the pair falls below the January 31 low at 1.3359. This would expose the asset to the January 4 low of 1.3318 and the January 5 low of 1.3288.
On the contrary, further rises would occur if the pair surpasses the January 17 high at 1.3542, which would take the asset towards the resistance of the round level of 1.3600, followed by the November 30 high at 1.3627.
USD/CAD 1-hour chart
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.
