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USDCAD Market Update

12/9/2022 11:34 AM

During the Asian session, the USD/CAD pair shows ambiguous trading dynamics, holding near 1.3590.

Yesterday, the asset was declining despite a stable news background: the US currency remains under pressure due to the upcoming meeting of the US Federal Reserve, which is expected to soften its "hawkish" rhetoric, and at the moment, more than 75.0% of analysts predict an increase in interest rates by only 50.0 basis points after a quadruple increase of 75.0 basis points.

On Wednesday, the Bank of Canada made a similar decision: the indicator rose by 50.0 basis points to 4.25%, which was already the seventh increase this year. In an accompanying statement, the regulator noted that economic recovery lags behind forecasts, and inflation remains high, amounting to about 7.0% – a maximum in the last 40 years. Experts believe that the agency will now pause in tightening monetary policy, as officials said that the current value is a "golden mean" that could deter households from continuing to increase their spending but perhaps not so much that weakening demand leads to a jump in unemployment. Amid inflation, Canadians will significantly cut spending over the New Year holidays, spending 19.0% less on gifts than in 2021, according to a survey by Maru Voice Canada. Thus, 70.0% of citizens believe that due to increased prices, they will not be able to meet the previously allocated amounts, 22.0% of respondents noted that the combination of inflation and higher interest rates led to the fact that they found themselves in a difficult financial situation and 10.0% – that they are not going to buy gifts at all.

On Friday, investors will focus on US statistics: forecasts suggest that industrial inflation will slow from 8.0% to 7.4%, and consumer confidence in December from the University of Michigan will decline from 56.8 points to 53.3 points.

On the daily chart, Bollinger Bands are growing moderately: the price range changes slightly but remains quite spacious for the current level of activity in the market. MACD reverses into a downward plane, keeping its buy signal (the histogram is above the signal line). Stochastic shows similar dynamics, retreating from its highs, signaling that the US currency may become overbought in the ultra-short term.

Resistance levels: 1.3600, 1.3650, 1.3700, 1.3807. | Support levels: 1.3550, 1.3500, 1.3450, 1.3400.

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