USDCAD cuts its losses and rises towards 1.3280

• USDCAD moves firmly towards 1.3300 following hawkish Fed comments.
• The Federal Reserve’s Waller said the Fed could raise 50 basis points in December or after that meeting.
• The dollar was buoyed by Waller’s remarks, while US Treasury yields rose.
• The Loonie is at the expense of Canadian CPI and GDP data for the week.

USDCAD recovers slightly after losing for two consecutive days. The pair bounced around the 100-day EMA at 1.3229, following remarks by Fed officials on Sunday. While factors such as the easing of Covid-19 conditions in China contributed to investor optimism, the Fed’s Waller’s comments suggesting further tightening spurred risk aversion. At the time of writing, USDCAD is trading at 1.3280, up 0.20%.

Dollar buoyed by comments from Fed officials

Risk aversion is the name of the game on Monday. The remarks on Sunday by the governor of the Federal Reserve (Fed), Christopher Waller, provoked a momentum of risk aversion. Waller said the Fed “still has a ways to go” in raising rates, commenting that the US central bank could moderate the size of interest rate hikes to 50 basis points at its December meeting or the nextreiterating that the US central bank is nowhere near a pause.

The US dollar (USD), supported by Waller’s remarks, rose as shown by USDCAD, which bottomed around 1.3250 and rose towards its daily high at 1.3306.

Canadian CPI and GDP data will influence the direction of the Loonie

Meanwhile, on the Canadian front, Bank of Canada (BoC) Governor Tiff Macklem has said inflation is too high and lower-income Canadians will be “disproportionately” affected by the economic slowdown. Apart from this, the Loonie would be at the expense of the Canadian Consumer Price Index (CPI) on Wednesday, as investors expect the CPI to rise to 7.0% yoy in October.

The US economic agenda will be published by Fed Vice President Lael Brainard, the Producer Price Index (PPI) for October and the New York Empire State Manufacturing Index. In Canada, September new vehicle sales and manufacturing/wholesale sales will shed some light ahead of Q3 GDP.

USDCAD Price Analysis: Technical Perspective

Technically, USDCAD has a neutral bias to the downside, although it would consolidate “firmly” if CAD buyers break above the 100 day EMA, as the head and shoulders chart pattern remains in play. The head and shoulders target is 1.3033, ahead of the 200 day EMA at 1.2979.

If the USDCAD breaks above the 1.3300 level, the daily high from November 11 at 1.3360 can be tested. Otherwise, the currency could fall towards the 100 day EMA, ahead of the 1.3200 figure. A break of the latter would expose the 1.3100 figure before the target of the H&S chart pattern.