The market has confidence in maintaining a dovish stance towards Canada, and the technical outlook for USD/CAD remains bullish!
Foreign exchange analyst Patricio Martin wrote that due to the prevailing positive sentiment towards the US dollar, the USD/CAD continued to rise on Monday, reaching its highest level since November 11th at 1.3907. The strengthening of the US dollar is supported by expectations that the Federal Reserve may not choose aggressive easing policies. Meanwhile, due to concerns about economic growth, the Bank of Canada is expected to cut interest rates again in December.
Due to the expectation that the Bank of Canada will maintain a aggressive policy easing stance at its upcoming December meeting, the Canadian dollar remains fragile. Prior to this, the Bank of Canada cut interest rates by 50 basis points on October 23, marking its fourth consecutive rate cut but the largest.
Martin stated that the bullish trend on the technical side of the US dollar against the Canadian dollar still exists, with RSI and MACD indicators flashing overbought signals.
The current relative strength index (RSI) of the US dollar against the Canadian dollar is 74, indicating that the currency pair is in an overbought area. RSI also shows a moderate upward trend, indicating that buying pressure is rising.
The convergence divergence of moving averages (MACD) also shows a bullish outlook, with the bar chart showing an upward trend, indicating that purchasing pressure is forming and the overall outlook for the currency pair remains optimistic. However, the overbought nature of these signals has opened the door for correction. Before the next bullish trend, the USD/CAD should find support between the levels of 1.3800 and 1.3900.
Daily chart of USD/CAD exchange rate
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