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The USDCAD is Consolidating Near Local Lows

1/16/2023 11:46 AM

After an uncertain growth attempt at last week's end, the USD/CAD pair continues its corrective decline, consolidating around 1.3381.

US inflation data affect the national currency negatively, signaling in favor of easing the "hawkish" rhetoric: it is expected that following the two-day meeting of the US Federal Reserve, which will begin on January 31, the regulator will decide to raise the interest rate by only 25.0 basis points against 50.0 basis points earlier. Analysts expect that by the end of the year if current economic trends continue, there will be a possible change in the monetary rate.

Meanwhile, rising prices are putting significant pressure on Canadian households. The Second Harvest report notes that the need of the country's residents for the services of food banks this year will increase by 63.0%, while in 2022, the demand is completely consolidated by around 134.0%. According to experts, the negative dynamics are developing against the backdrop of the cancellation of support measures for the population in force during the COVID-19 pandemic and inflation, which is held at a 41-year high of 10.3%. The Dalhousie University's Food Price Report predicts that food spending will rise 7.0% this year, with a family of four spending more than 16K dollars on groceries.

Canadian investors are waiting for the publication of key statistics on the consumer price index on Tuesday: a further decline in the index is predicted, which will impact the monetary policy of the Bank of Canada. The value, according to experts, will decrease from 6.8% to 6.3% YoY and will lose 0.5% MoM after rising by 0.1% in November.

On the daily chart, Bollinger Bands are steadily declining: the price range is expanding from below, letting the "bears" renew local lows. The MACD indicator is falling, keeping a relatively strong sell signal (the histogram is below the signal line). Stochastic, approaching its lows last week, is trying to reverse into an upward plane, signaling that the US dollar is oversold in the ultra-short term.

Resistance levels: 1.3400, 1.3450, 1.3500, 1.3550. | Support levels: 1.3356, 1.3300, 1.3226, 1.3150.

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