USD/CAD Price Forecast: Descending 20-day EMA supports more downside
- USD/CAD trades cautiously around 1.3580 amid the US Dollar’s underperformance.
- Investors await Fed speeches for fresh cues on the US interest rate outlook.
- The BoC opens the door for interest rate hikes amid upside inflation risks.
The USD/CAD pair trades with caution near Thursday’s low at around 1.3580 during the late Asian trading session on Friday. The Loonie pair trades weakly as the US Dollar (USD) is broadly under pressure, following Japanese intervention in the forex markets.
During the press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, is marginally higher to near 98.20, but is close to its 10-day low of 98.00.
US Dollar Price This week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the weakest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.25% | -0.62% | -1.43% | -0.70% | -0.82% | -0.45% | -0.59% | |
| EUR | 0.25% | -0.35% | -1.25% | -0.43% | -0.55% | -0.18% | -0.32% | |
| GBP | 0.62% | 0.35% | -0.88% | -0.07% | -0.20% | 0.17% | 0.03% | |
| JPY | 1.43% | 1.25% | 0.88% | 0.80% | 0.66% | 1.11% | 0.93% | |
| CAD | 0.70% | 0.43% | 0.07% | -0.80% | -0.08% | 0.31% | 0.11% | |
| AUD | 0.82% | 0.55% | 0.20% | -0.66% | 0.08% | 0.38% | 0.24% | |
| NZD | 0.45% | 0.18% | -0.17% | -1.11% | -0.31% | -0.38% | -0.14% | |
| CHF | 0.59% | 0.32% | -0.03% | -0.93% | -0.11% | -0.24% | 0.14% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
The next major trigger for the US Dollar will be commentaries from a slew of Federal Reserve (Fed) officials as the blackout period has ended after the monetary policy announcement on Wednesday.
In the policy meeting, the Fed decided to leave interest rates unchanged in the range of 3.50%-3.75%, as expected, with an 8-4 majority. Four members dissented from the hold decision, of which three called for a move away from the easing bias.
Meanwhile, the Canadian Dollar (CAD) outperforms as the Bank of Canada (BoC) warned on Wednesday that interest rates could rise, with energy prices remaining higher.
USD/CAD technical analysis
USD/CAD trades close to Thursday's low at around 1.3580 at the press time. The pair holds a bearish near-term bias as spot remains capped beneath the 20-day Exponential Moving Average (EMA) at 1.3698 and a Fibonacci-heavy resistance band starting at the 61.8% retracement near 1.3667.
A shift in the Relative Strength Index (14) below 40.00 warrants fresh downside momentum with no oversold signals in sight.
On the downside, the pair could slide towards the March 9 low of 1.3525 and the swing low at 1.3482 if it fails to hold the 78.6% Fibonacci retracement at 1.3585.
On the topside, a recovery would first face resistance at the 61.8% retracement at 1.3667, followed by the 20-day EMA at 1.3698 and the 50% retracement near 1.3725; only a sustained break above this cluster would ease the current bearish tone and open the way toward higher retracement barriers at 1.3782 and 1.3853.
(The technical analysis of this story was written with the help of an AI tool.)
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
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