USD/CAD is currently limited, with the 50-day EMA and the 1.40 level hindering upward movement, while the pair is positioned on the 200-day EMA. Market participants are closely monitoring the upcoming Canadian employment figures and the anticipated Federal Reserve rate cut next week for guidance on market direction.
The US dollar started strong against the Canadian dollar in Thursday’s trading session, but it has since retraced those gains as the 50-day EMA appears to act as a resistance level. Should we manage to surpass the 50-day EMA and, consequently, the 1.40 level, it is my belief that the US dollar will gain momentum. Ultimately, though, I believe much of this hinges on the expectation that the Federal Reserve will be cutting rates next week.
Additionally, this contributes positively to the interest rate differential. It’s important to note that Friday will see the release of Canadian employment figures, which could significantly influence subsequent developments. In light of this, it is essential to view the market as one that is likely to experience significant volatility. It is important to highlight that we are currently positioned directly at the 200-day EMA, which inherently carries a degree of significance. I currently have no inclination to short this pair, at least for the time being.
The upcoming move will likely become clear during the FOMC press conference following the interest rate decision on Wednesday of next week. Between now and then, I anticipate considerable volatility in the market, and we are nearing the lower boundary of the range. Therefore, disappointing Canadian employment figures could be the catalyst needed to reverse the trend and initiate a move back toward the upper limit of the range we have experienced over the past two months.