USD/CAD bounces up to test resistance at 1.3550 amid a cautious market mood
- The US dollar is testing previous support at 1.3550 after bouncing at 1.3475.
- Investors have turned cautuois ahead of key US employment indicators.
- Lower oil prices and hopes of a BoC pause are hurting the CAD.
The US Dollar has opened the week on a somewhat firmer footing, following a significant sell-off late last week, which sent the pair to fresh two-month lows below 1.3500.
Federal Reserve Chairman Powell vowed caution with monetary policy and observed that the effect of the restrictive monetary policy is starting to affect economic growth. These comments boosted hopes that the bank is done with hikes and increased bets that rate cuts might start as soon as in March, sending US yields tumbling and the US Dollar lower across the board.
The USD bottoms as market sentiment falters
Investors, however, have adopted a cautious stance on Monday, awaiting a string of US data, with a special interest on Friday’s Nonfarm Payrolls report, to assess the Fed’s next steps.
On the other hand Oil prices, Canada’s main export remain on the defensive. The outcome of the OPEC+ meeting has failed to tackle concerns about an excess of supply with the global economy expected to slowdown in 2024.
Furthermore, the positive impact of the stronger-than-expected Canadian employment data seen on Friday has ebbed. These figures do not change the expectations that the Bank of Canada will keep rates on hold after Wednesday’s meeting and start rolling back the tightening cycle in early 2024.
Technical inmdicators show the pair in a broader bearish trend, with negative momentum easing. A succesful break of 1.3550 opens the path towards 1.3620. On the downside, supports aare 1.3475 and 1.3420.
Technical levels to watch
Author
Guillermo Alcala
FXStreet
Graduated in Communication Sciences at the Universidad del Pais Vasco and Universiteit van Amsterdam, Guillermo has been working as financial news editor and copywriter in diverse Forex-related firms, like FXStreet and Kantox.
