Canadian Dollar Recovers, Eyeing Bank of Canada's Next Move

The Canadian dollar has seen a notable recovery, distancing itself from its recent monthly low. The USDCAD pair now shows a stable trend around 1.3435.

Market analysts are revising their expectations regarding the Bank of Canada's interest rate decisions. Initially anticipated to be significant, the rate cut is now expected to be more modest. The consensus is that any decision on rate adjustments will likely be postponed until June at the earliest, owing to an uptick in overall inflation. Recent data reveals the Consumer Price Index (CPI) climbed to 3.4% in December 2023, up from 3.1%, marking the first increase in the inflation rate in four months.

This inflation data comes after a previous decline in retail sales, which dropped by 0.2% month-over-month in November. This drop had prompted the Bank of Canada to reconsider the appropriateness of a conservative monetary approach. However, the latest inflation figures have reshaped these considerations.

USD/CAD Technical Analysis


In the H4 chart of USD/CAD, a declining trend is evident, with the pair aiming for 1.3403. The intermediate target of 1.3420 has already been met. Today, a corrective movement towards 1.3476 is likely. Upon completion, the decline could extend to 1.3403, and breaking this level might lead to a further decrease towards 1.3333. This scenario gains support from the MACD indicator, where the signal line is positioned above zero but pointing downwards.



On the H1 chart, the pair shows a consolidation pattern around 1.3477. Having dipped to a local low of 1.3420, it's possible to see a new consolidation phase above this mark today. An upward breakout is anticipated, potentially driving a corrective phase towards 1.3477 (testing from below). The Stochastic oscillator, with its signal line above 50 and potentially climbing to 80, corroborates this analysis.

By RoboForex Analytical Department

Disclaimer
Any forecasts contained herein are based on the author's particular opinion. This analysis may not be treated as trading advice. RoboForex bears no responsibility for trading results based on trading recommendations and reviews contained herein.