USD/CAD:DOWNTREND | FUNDAMENTALS+TECHNICAL ANALYSIS | SHORT 🔔

The Bank of Canada (BoC) is expected to raise rates by 75bp. Subsequently, the loonie is set to strengthen against the euro but weaken against the US dollar due to the stance of the European Central Bank (ECB) and the Federal Reserve (Fed), respectively, economists at Commerzbank report.

Further CAD gains against the euro seem possible
“On the market more than 75bp are already priced in for the OIS-based rate expectations over the 3-month horizon – i.e. the next two BoC meetings. Depending on whether the US central bank or the ECB is used as a benchmark this seems rather disappointing or quite attractive.”

“The loonie will continue to struggle to make significant gains against the USD even if the market increasingly expects one or more 50bp BoC steps. On the other hand, further CAD-gains against the euro seem possible, in particular in view of the continued war in Ukraine.”

USD/CAD Price Analysis: Rejection above 200-DMA once again recalls sellers

USD/CAD drops back below 1.2600, tracking the pullback in the US dollar.
The oil price rebound also lends support to the major.
USD/CAD turns lower towards 21-DMA after rejection above 200-DMA.
USD/CAD is holding lower ground below 1.2600, undermined by the renewed downside in the US dollar against its major peers.

The pullback in the dollar from two-year peaks could be mainly attributed to the steep correction in the USD/JPY pair after it faced rejection just below the 129.50 psychological barrier.

Meanwhile, the rebound in the price of WTI on lower US inventories and OPEC+ production levels also added to the weight on the major.

All eyes now remain on the Canadian Consumer Price Index (CPI) data and the Fed’s Beige Book to indicate the further direction in the pair.

Technically, USD/CAD is turning lower towards the horizontal 21-Daily Moving Average (DMA) support at 1.2554 after having failed to find acceptance above the mildly bullish 200-DMA over the past five trading days. The 200-DMA currently stands at 1.2628.

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