- USD/CAD prepares to reclaim the 1.3800 level amid a state of risk aversion ahead of Powell’s speech.
- Fed officials support a further increase in interest rates to ensure the return of inflation to 2% in a timely manner.
- Falling oil prices indicate that investors are less worried about the Middle East.
The USD/CAD pair extends its upward move towards the round 1.3800 level during the European session on Wednesday. The pair is expected to regain the critical resistance of 1.3800, being supported by a strong recovery in the US Dollar due to a state of risk aversion ahead of Federal Reserve (Fed) Chairman Jerome Powell’s speech.
The US Dollar Index DXY recovery has stretched above 105.80 as several Fed policymakers are eyeing one more interest rate hike from the central bank to ensure the return of consumer inflation to 2% timely. US 10-year Treasury yields have bounced to near 4.60% amid caution that Jerome Powell could discuss the need to raise interest rates further.
As for oil, crude oil prices hit a new four-month low amid concerns about global demand. Falling oil prices indicate that investors are less worried about the Middle East. It should be noted that Canada is the main exporter of oil to the United States and the drop in oil prices has an impact on the Canadian dollar.
USD/CAD recovered strongly to approach the 23.6% Fibonacci retracement (traced from September 9 at 1.3380 to November 1 high at 1.3900) at 1.3775. The pair has stabilized above the 50-period exponential moving average (EMA), indicating that the short-term trend has turned bullish.
The Relative Strength Index (RSI) (14) is moving towards the bullish range of 60-80, indicating that bullish momentum has been triggered.
Looking ahead, a decisive break above the October 27 high at 1.3880 would expose the round level resistance at 1.3900, followed by the October 13, 2022 high at 1.3978.
In an alternative scenario, a break below the October 24 low around 1.3660 would drag the pair towards the round support level of 1.3600. A further break could expose the pair to the October 7 low at 1.3570.
USD/CAD Two-Hour 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.
