USD/CAD clears key resistance, hits three-week highs in 1.2740 area as bulls eye return to 1.2800
|- USD/CAD is at three-week highs around 1.2740, having cleared some key resistance levels on the way.
- The buck has been given a broad boost in wake of Wednesday’s more hawkish than expected remarks from Powell.
- Short-term bulls will be betting that technical buying carries the pair to resistance in the 1.2800 area.
USD/CAD rallied above the 1.2700 level in recent hours to hit a new three-week high around 1.2740, the pair having broken to the north of its 50-day moving average close to 1.2710. USD/CAD now trades about 0.6% higher on the session near 1.2740, having rallied around 90 pips from earlier session lows at 1.2650. At these earlier session lows, it seems that the short-term bulls took the opportunity to add to long positions with the pair retesting a downtrend it broke above in wake of Wednesday’s hawkish Fed meeting.
Indeed, the more hawkish than expected tone of Fed Chair Jerome Powell’s remarks in the post-meeting press conference are the main reason why the US dollar has strengthened across the board, including versus the loonie, on Thursday. Arguably, stronger than expected US GDP growth figures for Q4 2021 are helping sustain the broad USD rally on Thursday. Wednesday’s BoC meeting, where, like the Fed, the central bank also gave the nod to a rate hike in March, has been largely forgotten at this point. Although looking at the daily G10 performance table, with CAD holding up better than most of its G10 peers, it may be offering some relative support (versus the likes of AUD, NZD and NOK for example).
US equity markets have been choppy, as have global crude oil markets, with both asset classes swinging from the green back into the red over the course of the session and not offering the risk/commodity-sensitive loonie much support. With USD/CAD above the downtrend that had prevailed since mid-December and above key resistance in the 1.2700 area, it seems likely that technical buying can carry the pair higher towards resistance around 1.2800 in the short term. If Friday’s US Core PCE inflation data for December comes in higher than expected, this will likely help this move via a boost to the buck amid renewed Fed tightening bets.
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