- The US dollar jumps across the board following comments from Fed Chairman Powell.
- USD / CAD rose to test the 1.2380 resistance area.
The USD / CAD It rose from 1.2350 to 1.2383, matching Thursday’s high. The pair remains close to the high, with strong bullish momentum. A break to the upside would clear the way for a test of 1.2400.
A stronger US dollar across the board has been the critical driver for USD / CAD. Fed Chairman Powell mentioned that high inflation will likely last well into next year. He stated that it is time to reduce QE but not to raise rates. US stocks turned negative after Powell’s comments and commodities reversed dramatically.
USD / CAD faces a key barrier around 1.2400 / 10. If it breaks higher, it could clear the way to more profit. ING analysts see that the rally in the CAD looks pretty tired. “We expect to see more support at USD / CAD around the 1.2300 level. Most of the positives (BoC tightening, strong economic recovery, higher energy prices) show up in pricing and our short-term fair value model currently shows a 1.5% USD / CAD undervaluation. “
A key event next week will be the Bank of Canada meeting. At ING, they expect the central bank to deliver another round of phasing out “but that’s a move that is likely to come at a full price.” They see the risk balance clearly tilted to the upside for USD / CAD next week. “August GDP data released two days after the BoC meeting may provide only little help to the CAD.”
Technical levels
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