- USD/CAD rises above 1.3700 as traders eye a possible break of 1.3800 as they focus on Friday’s NFPs.
- Bank of Canada Governor Macklem said “further interest rate increases are warranted”, reiterating the BoC’s hawkish stance.
- USD/CAD Price Forecast: An inverted head and shoulders remain on the hourly chart.
The USD/CAD rises sharply during the North American session as Fed officials remain focused on curbing inflation, ignoring a possible US recession, while market expectations of a Fed pivot decline, as US stock markets show, posting losses. Therefore, USD/CAD is trading at 1.3722, up 0.81% on the day.
At the time of this writing, Bank of Canada Governor Tiff Macklem said in prepared remarks that while the Canadian economy is beginning to slow, the labor market remains tight while demand continues to outshine supply. . Macklem commented that the bank needs clear evidence that inflation is coming down.
Therefore, the BOC’s Macklem added that “there is more to be done”, which paves the way for further rate hikes. The Bank of Canada’s next decision on interest rates will be on October 26.
Market Reaction
USD/CAD reacted lower after its statements by crossing the wires, falling below 1.3700, but quickly reversed its move and tested daily highs.
Previously, Canada’s Ivey PMI for September increased by 55.9 in September, unadjusted, while seasonally adjusted, it came in at 59.5, lower than previous figures.
Apart from this, the US data, although it gave signs that the labor market could begin to feel the monetary policy of the Fed, traders remain at bay, waiting for the payroll figures non-farm on Friday. Initial jobless claims reported by the US Department of Labor beat expectations in the week ending October 1, rising to 219,000, above estimates of 203,000, while the 4-week average it was unchanged at 206.5.000.
Ahead of the Wall Street open, Minnesota Fed President Neil Kashkari said the Fed is “pretty far from pausing rates,” reiterating that there is “more work to do” to bring inflation toward the 2% from the Fed. Separately, on Wednesday, Bostic of the Atlanta Fed and Daly of the San Francisco Fed expressed the need to raise rates for longer, not taking into account possible rate cuts. in 2023.
USD/CAD Price Forecast
The USD/CAD one hour chart grabbed the spotlight as an inverted head and shoulders chart pattern emerged. Earlier, USD/CAD sank towards its daily low at 1.3564, but is recovering above 1.3720, testing the aforementioned head and shoulders pattern around current exchange rates. Once broken, it could open the door for further gains, with daily pivot R2 being the immediate target at 1.3800, ahead of head and shoulders targets at 1.377.
Source: Fx Street
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