USD/CAD Bulls Take Advantage of Dovish BoC Sentiment and Fed’s Dovish Line

• USD/CAD bulls are advancing despite the previous day’s bearish close.
• The dollar has strengthened on dovish sentiment around the Fed and the BoC.

In this scenario, we have a 61.8% Fibonacci retracement level near 1.3350 below the neckline near 1.3380. However, since the USD/CAD If you are trying to close higher during the day, that will leave the emphasis on the upside where eyes are on 1.3475.

The loonie is trapped between 1.3440 and 1.3420, below the 2 1/2 month high of 1.326 struck earlier in the month.

The US dollar continues its relentless rally as markets fear the Federal Reserve is not as close to a pivot as originally assumed, following what was seen as a dovish outcome of the Fed’s interest rate decision. Federal Reserve last week. At the same time, the Bank of Canada is expected to be the first major central bank to pause raising rates, after eight hikes in the last eleven months.

As of this writing, the USD/CAD is trading towards the daily highs, but the bears are present, chipping away at a key support structure from the consolidation of the daily highs. USD/CAD has ranged from a low of 1.3359 to 1.3444 so far and has been forced higher by dovish sentiment at the Bank of Canada which has raised its key interest rate to 4.5% in January, the highest level in 15 years.

However, Governor Tiff Macklem said further rate hikes would not be necessary if, as expected, the economy stagnated and inflation fell. The summary of the Governing Council’s deliberations was released today, according to which policy makers decided to raise rates in January due to labor market tensions and higher-than-expected growth.

As for the Dollar, it is also trapped higher after today’s rally, testing near 104.00 and 103.00 on the downside according to the DXY Index, as investors paused selling the greenback a day later. that Federal Reserve Chairman Jerome Powell did not significantly change his outlook on US interest rates. There is an air of jitters following last week’s strong jobs report, although the outlook continues to lean lower as the Fed nears the end of its tightening cycle.

Markets are trying to price in rate cuts by the end of the year, though Fed officials are still sounding the alarm on higher inflation prospects for longer, depending on data that is fueling a recovery in the dollar:

Bulls rule above 103.00, but price is testing the support of the dynamic trend line. If this were to give way, a bearish thesis could be drawn for a continuation down below 103.00.

USD/CAD Technical Analysis

Meanwhile, USD/CAD is range-bound for the day, but the bias is to the downside given the neckline of the W formation:

The pattern is a reversal pattern and tends to pull price back to retest support in that area. In this scenario, we have a 61.8% Fibonacci Retracement level near 1.3350 below the neckline near 1.3380. However, as price is trying to close higher for the day, that will leave an upside emphasis where all eyes are on 1.3475.