USD/CAD Forecast: Technicals favor correction to 1.27 levels
The sharp decline in the Crude prices in the last seven sessions pushed the USD/CAD to a fresh multi year high of 1.2832 levels today. Ahead of the FOMC meeting, the Canadian dollar is under pressure due to weak Crude prices. If the Fed statement today bolsters the expectations of a rate hike in June, we could see the USD/CAD pair rise towards 1.3 levels. On the other hand, an outright dovish policy statement, though a highly unlikely event, could result in the sharp appreciation in CAD.
However, charts indicate the pair could correct to 1.27-1.2680 levels today. The pair has been struggling to extend gains above 1.2820-1.2830 since Friday, which contradicts the fall in WTI Crude from USD 47.00 on Friday to USD 42.00/barrel today. The USD/CAD pair also shows a bearish price-RSI divergence on the 4-hour charts. Meanwhile, the hourly RSI has dipped below 50.00 levels, indicating weakness in the pair.
Gold Forecast: Expected range USD 1120/Oz-USD 1175/Oz
Gold prices are trading marginally lower at USD 1148.1/Oz levels ahead of the FOMC policy statement. The metal failed to strengthen despite the downward revision of the growth forecasts by the rating agency Fitch earlier today. Losses in the US equity markets have also failed to support the yellow metal. Moreover, the metal has been restricted largely in the range of USD 1145-1160/Oz levels despite most of the US data except jobs report repeatedly disappointing expectations.
The persistent weakness despite of the weakness in the US equities today indicates the markets believe the Fed would drop the word “patience” today, thereby opening doors for a rate hike in June or September. The markets also expect the Fed to revise its GDP and inflation forecasts lower, while the interest rate DOT chart is likely to indicate a slower rise in rates.
Gold prices are likely to dip to USD 1120-1100 levels if the Fed drops the word”patience”. However, fresh demand for the yellow metal could be seen at USD 1120-1100 levels as the dropping of the word patience is likely to be accompanied by a downward revision of the growth forecasts and a indication of slower rate hikes. On the other hand, the metal could rise to its 5-WMA at USD 1175 in case the Fed surprises markets by retaining the word “patience” in its forward guidance. However, gains are likely to be capped at the same as equities could rally in this case.
On weekly charts, the metal is moving in a channel, with prices about to test the lower end of the channel at USD 1120 levels. The weekly RSI too has breached the trend line support. Meanwhile, the hourly chart shows, the gains are being capped at the 50-MA, currently at USD 1151.6, since the beginning of the week. The hourly and the 4-hour RSI also favors further downside in the metal.
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