Usdcad sees slight drop amid anticipation of key interest rate decisions

USDCAD Analysis

Performance after Monday
Period	Pct	Chg	Momentum
Monday	-0.06%	-8 Pips
Week to-date	-0.04%	-5.1 Pips
January	0.13%	18.2 Pips

Upcoming key events (London Time)

Wed 02:45 PM CAD Bank of Canada Policy Interest Rate
Wed 07:00 PM USD Fed Interest Rate Decision (Federal Funds Rate)

What happened lately

In December, the United States saw new-home sales grow by 3.6%, which is a deceleration compared to the 5.9% increase observed in November. This suggests a cooling in the momentum of the housing market as the year ended. Despite this slowdown, the overall trend in new-home sales remains positive, illustrating continued demand and applicable market resilience. The moderation in growth rates might reflect potential affordability challenges or seasonal factors that typically affect housing activity at the end of the year. Analyzing these data trends provides insights into broader economic conditions, such as consumer confidence and financial sector impacts like mortgage rates, which could perhaps play a role in slightly hampering the pace of new-home sales in coming months.

Attention now turns to significant economic events scheduled for the coming days, notably the policy interest rate reports from two major North American economies. Canada is set to release its interest rate decision via the Bank of Canada, a critical indicator that can have substantial implications for currency values, inflation expectations, and economic growth projections within Canada. On the same day, the United States will announce its Federal Funds Rate decision, a pivotal event that holds the power to influence global financial markets. Both these events carry high-impact potential, as they can signal future monetary policy actions that affect everything from investment flows to consumer borrowing costs across the continent.

Regarding the USDCAD currency pair, which saw a minor decline of -0.06% to settle at 1.43680 on Monday, the pair appears to be in a phase of consolidation. The upcoming interest rate decisions from both the U.S. and Canada will be critical in determining the pair’s next directional move. If the Federal Reserve indicates continued tightening or hints at higher future interest rates than expected, the USD could strengthen, potentially driving the USDCAD higher. Conversely, if the Bank of Canada opts for a hawkish stance or if market participants perceive US policy as dovish, the CAD might appreciate, leading to further declines in the USDCAD pair. Traders and investors will closely monitor these announcements for cues that could break the current consolidation and guide the pair’s momentum in the near term.

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What can we expect from USDCAD today?

USDCAD on Monday dropped -0.06% to 1.43680. Price is below 9-Day EMA while Stochastic is rising.

Updated daily direction for USDCAD looks mixed as the pair is likely to consolidate above 1.43308 (S1).

Looking ahead today, to see upside interest, we prefer to look at price breakout of last daily high of 1.44016 or trades above daily pivot 1.43662. Break above could target R1 at 1.44034. While to the downside, we are looking at 1.43308 (S1) and daily low of 1.43290 as support levels. USDCAD need to break on either side to indicate a short-term bias. A close below 1.43290 would indicate selling pressure.

For the week to-date, take note that USDCAD is mixed as compared to the prior week.

Key levels to watch out:

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