The USD/CAD pair demonstrates a rejection of gains at the 1.38 level, with resistance remaining intact, while recent Federal Reserve bond-buying activities exert pressure on the dollar. The current tightening of rate differentials contributes to volatile trading conditions, presenting risks below 1.37 and 1.36, whereas an upward movement necessitates a breach of 1.39. The US dollar made an attempt to strengthen against the Canadian dollar during the Thursday session; however, it ultimately retraced its gains as the 1.38 level presented considerable resistance, and the market is presently fluctuating near the prior downtrend line.
While that may provide some support, numerous questions arise regarding the potential impact of monetary policy on the fund reserve’s performance. The Federal Reserve has indeed confirmed their commitment to purchasing $40 billion in bonds each month moving forward. Although they prefer not to label it as quantitative easing, that is precisely what it entails. Given the current circumstances, the US dollar appears to be facing some challenges, and the interest rate differential between the two countries has narrowed.
The market exhibits considerable volatility, and there is a possibility of falling below the 1.37 threshold, which would certainly indicate a bearish outlook. However, breaking below the 1.36 level likely indicates a significantly different scenario, and one must exercise caution in that area. It is quite plausible that we are facing a genuine scenario where we will establish a range once more, which has been typical for this pair historically.
A break above the 1.39 level would introduce significant bullish momentum; however, currently, it appears we are not positioned to achieve that. The market appears to be oscillating, attempting to determine its next move, and it certainly resembles a scenario where participants are assessing the potential for genuine momentum in either direction.