Usdcad rises amidst contrasting interest rate decisions in the US and Canada

USDCAD Analysis

Performance after Wednesday
Period	Pct	Chg	Momentum
Wednesday	0.08%	11 Pips
Week to-date	0.21%	29.6 Pips
January	0.45%	64.9 Pips

Upcoming key events (London Time)

Thu 01:30 PM USD GDP annual rate

What happened lately

In the United States, the Federal Reserve kept the Federal Funds Rate unchanged at 4.5%. The U.S. House Price Index for November showed a slight decrease to 0.3% from 0.5% in October. This indicates stability in interest rates, but lingering caution in the housing market. December had a substantial decrease in durable goods new orders at -2.2%, a fall from the revised -1.2% in November. However, durable goods excluding transportation witnessed a slight improvement, increasing by 0.3% after a previous decline. Durable goods orders excluding defense fell markedly by 2.4% from -0.4% in November, suggesting decreased demand in military-related manufacturing. Nondefense capital goods orders excluding aircraft also experienced a decrease, declining to 0.5% from a revised 0.9%, reflecting a potential dip in business investment. These data points highlight mixed signals in different economic sectors, showing weaknesses in consumer and business spending, yet some resilience in certain segments.

In Canada, the Bank of Canada reduced its Policy Interest Rate to 3% from 3.25%. This move indicates an easing monetary policy stance, likely in response to slowing economic conditions or inflation concerns. Lower rates should, in theory, stimulate economic activities by cheaper borrowing costs, although they may also reflect underlying economic challenges. The decrease suggests proactive central bank measures aimed at fostering growth amid potential economic headwinds.

The recent economic data from the U.S. and Canada is likely to have an impact on the USDCAD currency pair. The Federal Reserve’s decision to keep interest rates stable contrasts with Canada’s rate cut, potentially increasing the attractiveness of the U.S. dollar relative to the Canadian dollar. This differential in monetary policy, alongside mixed U.S. economic signals, might sustain the upward trajectory of the USDCAD exchange rate, as observed by the pair’s 0.08% rise to 1.44147. However, the upcoming U.S. GDP annual rate release is a high-impact event that could significantly influence market sentiment and trading positions. If the GDP report underscores robust U.S. economic growth, it could further support the U.S dollar, potentially driving the USDCAD higher. Conversely, weaker GDP data might challenge the current trend and result in downside pressure on the pair.

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What can we expect from USDCAD today?

USDCAD on Wednesday rose 0.08% to 1.44147. Price is above 9-Day EMA while Stochastic is rising.

Updated daily direction for USDCAD looks bullish as the pair ended higher after Wednesday trading session.

Looking ahead for the day, immediate upside resistance level is R1 at 1.44619 with break above could target R2 at 1.45092 or figure level area. While towards the downside, we are looking at daily low of 1.43870 as an important support. Break below this level could weaken the current bullish momentum. A break above 1.44717 may suggest continuation after recent positive movement.

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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