- USD / CAD rallies as Jerome Powell’s renomination appears to be a continuation of the Fed’s monetary policy.
- The US dollar index rises to new 16-month highs, above 96.40.
- The absence of Canadian economic data keeps investors focused on the dynamics of the US economy.
The USD / CAD starts the week on the right foot, climbing during the American session trading at 1.2680 at the time of writing. In the night session, the dollar was stable. However, in the last hour, it is on the mend when US President Joe Biden reappointed Federal Reserve Chairman Jerome Powell for a second term. In addition, he nominated Lael Brainard, the other candidate, for a vice president position.
The US dollar rises after Powell’s rename
Meanwhile, the U.S. dollar index, which tracks the dollar’s performance against a basket of six rivals, is up 0.39% to 96.44, its highest level since July 2020, supported by rising U.S. yields. US bonds, as the market sees Powell’s re-election as a continuation of current monetary policy.
Furthermore, in recent weeks, investors appear to be convinced that the Fed will raise rates in mid-2022. Powell’s re-nomination cemented those expectations, as the yield on 10-year US Treasuries has up 0.5%, approaching 1.60%. Additionally, over the past week, Fed policymakers have expressed interest in increasing the pace of QE downsizing, so the US central bank may have room for maneuver as it moves forward. inflation continues to record new highs in the following months.
Additionally, the Canadian dollar was unable to capitalize on higher crude oil prices, as the Western Texas Intermediate (WTI) advanced 0.71%, trading at $ 76.65, as of press time.
Canada’s empty economic agenda has weighed on the CAD as investors focus on the dynamics of the US dollar. On the US front, the Chicago Fed National Activity Index for October rose 0.76, better than the September reading of -0.18.
Therefore, throughout this week, the USD / CAD could appreciate. Strong macroeconomic data from the US in recent weeks, and the Fed’s preferred inflation gauge, the PCE, would appear for the week. A higher reading could increase the chances that the US central bank will act to deal with high prices, thereby boosting the dollar.
USD / CAD Price Forecast: Technical Outlook
USD / CAD is trading above Friday’s high of 1.2661, which is now acting as support. The 1 hour chart shows the bullish bias of the pair, although it encounters strong resistance at the R1 pivot point around 1.2681, retreating towards current levels. The 1-hour Simple Moving Averages (SMAs) are below the pair’s price, so lower corrections in the near term could be seen as buying opportunities for USD bulls.
Resistance levels are at 1.2700. The confluence of a downtrend line on the daily chart and the September 29 high of 1.2774 would be hard to beat on the way to 1.2800.
On the other hand, the first support would be the November 19 high at 1.2661, followed by the 100 SMA at 1.2605.
Technical levels
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