- USD/CAD holds in consolidation as the US dollar attempts the upside, but fails to breakout.
- Fed's forward guidance leaves the US dollar hanging on the balance of improved risk sentiment.
- 1.33 on the cards if there is a bullish breakout of consolidation from dynamic trendline support.
USD/CAD is currently trading at 1.3176 between a range of 1.3127 and a high of 1.3200 in a choppy consolidation of the correction of the daily impulse.
The Federal Reserve event was unable to shake out any spot market dollar bulls that are eager for an upside correction.
We will have to wait to look at data collected since the Fed meeting as for how CTFC positing might have been affected by the event.
However, there was little to encourage a bullish bias for the greenback, given that the Fed consensus suggests that there will be no changes before 2024.
Meanwhile, there was some acknowledgement of improved economic conditions which seemed to have supported the dollar during Fed Chair Jerome Powell's presser – rather counterintuitively though.
CAD hangs in the balance of the US dollar and oil
To date, the view that a reflationary Fed policy has been a dollar negative.
Such a policy should help to support stocks and commodities (CAD is correlated to commodities).
If there is a persistent sense of a recovery, then that should be a weight on the greenback.
Oil breaks $40bbls
As for commodities, the price of oil has been on the march and broke the $40 handle in mid-North American markets on Wednesday as risk appetite improved.
In addition, the latest API data showed a heavy decline in oil inventories, while headlines have also suggested OPEC+ compliance was above 100% for August.
However, if oil now struggles to gain much further ground and if the US dollar dies indeed breakout to the upside, USD/CAD could be sent on its way to the 1.33 handle as per the technical analysis below:
USD/CAD levels
While al of the above points to a stronger Canadian dollar, the technical landscape on the charts remain negative, bullish USD/CAD.
As illustrated here, it has been a difficult environment to stay long of USD/CAD while the price has consolidated in sideways price action in anticipation of a breakout to the upside:
Original setup showed that the price was likely due an upside extension:
-637353775346878161.png)
On the 4-hour time frame, however, the price has just moved sideways in the creating of dynamic trendline support:
-637358823915620806.png)
At this juncture, bulls may well be trapped, but a break of the current resistance structure will likely lead to the breakout that has been expected.
However, failures at resistance and a break of the trendline support and support structure will invalidate such bullish prospects.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD clings to gains near 1.0700, awaits key US data
EUR/USD clings to gains near the 1.0700 level in early Europe on Thursday. Renewed US Dollar weakness offsets the risk-off market environment, supporting the pair ahead of the key US GDP and PCE inflation data.
USD/JPY keeps pushing higher, eyes 156.00 ahead of US GDP data
USD/JPY keeps breaking into its highest chart territory since June of 1990 early Thursday, recapturing 155.50 for the first time in 34 years as the Japanese Yen remains vulnerable, despite looming intervention risks. The focus shifts to Thursday's US GDP report and the BoJ decision on Friday.
Gold price lacks firm intraday direction, holds steady above $2,300 ahead of US data
Gold price remains confined in a narrow band for the second straight day on Thursday. Reduced Fed rate cut bets and a positive risk tone cap the upside for the commodity. Traders now await key US macro data before positioning for the near-term trajectory.
Injective price weakness persists despite over 5.9 million INJ tokens burned
Injective price is trading with a bearish bias, stuck in the lower section of the market range. The bearish outlook abounds despite the network's deflationary efforts to pump the price. Coupled with broader market gloom, INJ token’s doomed days may not be over yet.
Meta takes a guidance slide amidst the battle between yields and earnings
Meta's disappointing outlook cast doubt on whether the market's enthusiasm for artificial intelligence. Investors now brace for significant macroeconomic challenges ahead, particularly with the release of first-quarter gross domestic product (GDP) data on Thursday.