USD/CAD pushes on towards 1.2900 as hawkish Fed’s Waller spurs US dollar gains


  • USD/CAD is approaching 1.2900 after hawkish comments from Fed member Waller, who said that March meeting was live.
  • A break above 1.2900 would likely open the door to a test of the initial post-Fed meeting highs near 1.2940.

Some had thought that this week’s rollercoaster ride in FX markets might have been over by the midpoint of the US session but hawkish rhetoric from influential Fed board member Christopher Waller has injected a dose of dollar strength that has accelerated USD/CAD’s upwards trajectory. Waller said that the "whole point" of the Fed's decision to accelerate the pace of its QE taper was to make the March Fed meeting "live" for a first rate hike. A hike in March, he said, was now his base case, although he could see the hike pushed out to May.

According to the CME Fed Watch, markets are now pricing a roughly 50% chance that the Fed hikes rates by 25bps to 0.25-0.50% from 0.0-0.25% in March. The hawkish repricing in USD Short-Term Interest Rate (STIR) markets has helped to push USD/CAD above the 1.2850 level and the pair is now eyeing a test of the 1.2900 level. At current levels in the 1.2880 area, the pair is trading with gains of about 0.85% on the day and is one of the worst-performing G10 currencies alongside NZD and SEK, weighed amid a sharp drop in crude oil prices.  

A break above 1.2900 would likely open the door to a test of the initial post-Fed meeting highs near 1.2940. To recap the Fed’s meeting quickly, the Fed doubled its QE taper speed and indicated as many as three rate hikes in 2022. In the post-Fed press conference, Fed Chair Jerome Powell avoided being as explicit about the timing of rate hikes as Waller.

Notably, Waller has been ahead of the curve regarding the Fed’s shifting stance in recent months and was calling for a faster QE taper and earlier rate hikes (alongside FOMC member James Bullard) long before this become the consensus view of the committee. In that regard, he is one to watch out for at the Fed as a potential “thought leader”. A March hike would likely position the Fed as implementing their first rate hike ahead of the BoC, who have indicated lift-off could occur in the middle quarters of 2022 (i.e. no earlier than April). That means USD/CAD could be vulnerable to further hawkish Fed induces upside.

USD/Cad

Overview
Today last price 1.2879
Today Daily Change 0.0099
Today Daily Change % 0.77
Today daily open 1.278
 
Trends
Daily SMA20 1.2746
Daily SMA50 1.2561
Daily SMA100 1.2595
Daily SMA200 1.2482
 
Levels
Previous Daily High 1.2858
Previous Daily Low 1.2764
Previous Weekly High 1.2843
Previous Weekly Low 1.2608
Previous Monthly High 1.2837
Previous Monthly Low 1.2352
Daily Fibonacci 38.2% 1.28
Daily Fibonacci 61.8% 1.2822
Daily Pivot Point S1 1.2743
Daily Pivot Point S2 1.2706
Daily Pivot Point S3 1.2649
Daily Pivot Point R1 1.2837
Daily Pivot Point R2 1.2895
Daily Pivot Point R3 1.2931

 

 

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