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USDCAD Market is in a State of Uncertainty

12/13/2022 2:00 PM

Last week, the USD/CAD pair rose to the level of 1.3671 (Murray level [4/8]), which it tested several times, but could not break higher.

Currently, the market is in a state of uncertainty, as investors are waiting for two important events – the publication of November inflation data in the USA and the decision of the US Fed on the interest rate. Inflation statistics are coming out today and promise to confirm a further decline in price growth: it is likely that the index will decrease from 0.4% to 0.3% on a monthly basis, and from 7.7% to 7.3% on an annual basis. The implementation of this forecast will give the US regulator another argument in favor of slowing down the rate of adjustment of the value from 75.0 basis percentage points to 50.0 basis percentage points and will pave the way for a temporary slowdown in monetary policy tightening, which may weaken the position of the US currency against its main competitors. Nevertheless, there are risks that the US Fed will eventually raise the interest rate much higher than the expected peak of 5.0%.

The prospects for the Canadian currency also look ambiguous. The Central Bank of Canada last week raised the interest rate from 3.75% to 4.25%. Earlier, Governor Tiff Macklem said that the tightening of monetary policy is starting to work, slowing the economy, but a serious price increase may require additional measures and cause a risk of recession. In general, the American economy is still resisting the global crisis and interest rate hikes more successfully than the Canadian one, so a possible price decline against the background of the actions of the US Fed is likely to be temporary and will not lead to a change in the current upward trend.

The key for the "bulls" is still the level of 1.3671 (Murray level [4/8]), consolidation above which will give the prospect of growth to the levels of 1.3916 (Murray level [6/8]) and 1.3975 (the area of October highs). Otherwise, the decline will be able to resume to the middle line of the Bollinger Bands in the area of 1.3485, but it is unlikely to go lower.

The upward reversal of the Bollinger Bands and the increase in the MACD histogram in the positive zone indicate the continuation of the upward trend, but the reversal of the Stochastic near the overbought zone does not exclude the development of a downward correction.

Resistance levels: 1.3671, 1.3916, 1.3975. | Support levels: 1.3485, 1.3427.

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