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13.12.202413:26 Forex Analysis & Reviews: USD/CAD: Analysis and Forecast

Exchange Rates 13.12.2024 analysis

Today, the USD/CAD pair has reached a new multi-year high last seen in April 2020. The Canadian dollar continues to face pressure due to the Bank of Canada's aggressive monetary easing and dovish outlook. Previously, the Bank of Canada reduced its key interest rate by 50 basis points for the second consecutive meeting, citing slower-than-expected growth in the final quarter of the year. Additionally, the bank noted that potential new tariffs on Canadian exports to the U.S. have added uncertainty to economic prospects. Alongside this, bullish sentiment for the U.S. dollar is acting as a tailwind for the currency pair.

According to the U.S. Bureau of Labor Statistics yesterday, the Producer Price Index (PPI) rose by 0.4% in November, with the annual rate accelerating from 2.6% to 3%. Furthermore, the annual core PPI reached 3.4% year-over-year, surpassing all estimates. Combined with the Consumer Price Index (CPI) released on Wednesday, this suggests that progress in reducing inflation toward the Federal Reserve's 2% target has stalled. Additionally, expectations that the Federal Reserve will take a cautious stance on rate cuts, partly due to U.S. fiscal policies under President Trump potentially driving inflation, continue to support higher yields on U.S. Treasury bonds, pushing the U.S. dollar to a new monthly high.

Exchange Rates 13.12.2024 analysis

However, dollar bulls are hesitant to open new positions ahead of the highly anticipated FOMC monetary policy meeting, which begins next Tuesday and concludes on Wednesday with a rate decision. Investors will be looking for guidance on the Fed's path to rate cuts, which could influence the short-term price dynamics of the U.S. dollar and provide fresh momentum for the USD/CAD pair.

Exchange Rates 13.12.2024 analysis

Meanwhile, modest gains in crude oil prices could offer some support to the Canadian dollar, potentially limiting further upward movement for the pair.

Nonetheless, spot prices remain on track for a third consecutive week of gains, extending a nearly three-month uptrend amid a supportive fundamental backdrop.

A break and close above the 1.4200 psychological level is seen as a new trigger for bulls. However, the Relative Strength Index (RSI) on the daily chart has entered the overbought zone. Thus, it would be prudent to wait for a short-term consolidation or a moderate pullback before initiating new long positions. Any significant corrective decline is likely to find strong support around 1.4155, followed by 1.4120, the psychological 1.4100 level, and the weekly low near 1.4090. A breach of the weekly low could trigger extended corrective trading and open the door for deeper losses.

Despite this, the constructive setup for USD/CAD supports a move toward testing the April 2020 swing high near 1.4300. A subsequent move higher could target the next significant resistance near 1.4350, above which bulls might aim for a reclaim of the 1.4400 psychological level.

Exchange Rates 13.12.2024 analysis

Exchange Rates 13.12.2024 analysis

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