The USD/CAD pair edged slightly lower to 1.3820 during Thursday’s European session, following its climb to an 11-week high above 1.3850 on Wednesday. The Loonie pair has been on a steady upward trend since September 25 but has now paused as investors await fresh signals from the Bank of Canada (BoC) and the Federal Reserve (Fed) regarding their monetary policy plans for the rest of the year.
On Wednesday, the Bank of Canada cut its key interest rate by 50 basis points (bps) to 3.75%, as widely anticipated. This marks the fourth consecutive rate reduction, with a total of 125 bps cuts this year, as the central bank responds to a slowing economy and persistent disinflationary pressures.
Looking ahead, the Canadian Dollar (CAD) is likely to be impacted by August’s Retail Sales data, set to be released on Friday. The data, which serves as a crucial indicator of consumer spending, is expected to show a 0.5% increase, down from 0.9% in July.
Meanwhile, the US Dollar (USD) remains strong, trading just above its August highs. Investors are betting on a measured approach from the Federal Reserve, as strong Nonfarm Payrolls, Services PMI, and Retail Sales figures from September have alleviated concerns about an economic slowdown.
The USD/CAD pair saw a surge in buying interest after breaking past the September 19 high around 1.3650. The short-term outlook for the pair remains bullish, with the 20-day and 50-day Exponential Moving Averages (EMAs) around 1.3725 and 1.3665, respectively, pointing upward.
Additionally, the 14-day Relative Strength Index (RSI) remains in a bullish range between 60 and 80, indicating strong momentum. A sustained break above Wednesday’s high of 1.3863 could open the door for further gains, with resistance at the 1.3900 level and a potential test of the Year-to-Date (YTD) high at 1.3945.
However, if the pair slips below the September 19 high of 1.3650, it could face further downside, with support at the May 16 low near 1.3600 and the September 13 high of 1.3538.
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