USD/CAD continues its recent freefall as the Canadian dollar stages a strong comeback. It has slipped in the last six consecutive days, reaching its lowest level since September 22nd. It is down by close to 2% from its peak this month.
Canadian Dollar Jumps as Catalysts Jump
The USD/CAD pair is falling for two crucial reasons. One of them is the fact that crude oil prices have continued soaring this month. Brent, the international benchmark, has jumped to $111.77 today and is nearing the important resistance level of $112. Such a move will raise the probability of oil soaring to $120 in the near term.
Crude oil prices are rising as the crisis in the Middle East escalates, with Iran continuing to shoot ships that are crossing the Strait of Hormuz. Saudi Arabia and Houthis are escalating their attacks. These developments benefit Canada since it is one of the biggest oil exporters in the world, with most of its oil coming to the United States.
The USD/CAD pair is also falling because of the potential Federal Reserve and Bank of Canada (BoC) divergence. Most economists expect the Fed to leave interest rates unchanged between 3.75% and 4% in its meeting next week. That happened after US macro data showed that the economy created just 29k jobs last month.
On the other hand, analysts expect that the Bank of Canada will hike rates this month. Odds of the rate hike happening have jumped to over 80% on Polymarket, the leading predictions platform. If this happens, it will bring rates to 2.50%, bridging the gap between the US and Canada.
Odds that the BoC will hike rates rose after the last consumer inflation report. Canada said that the core CPI rose 2.2% in September, while the headline figure rose 3.1%.
USD/CAD Forecast: Technical Analysis
USD/CAD chart | Source: TradingView
On the charts, we see that the USD/CAD pair has slumped in the past few days. It dropped from a high of 1.4297 to the current 1.4020, making the Canadian dollar one of the best-performing currencies.
Based on trend-following principles, there is a likelihood that the pair will continue falling, potentially to the 50% retracement level of 1.3887. However, a closer look shows that it has settled at the 100-day moving average, while the Average Directional Index (ADX) has dropped to 32.80. These technicals suggest that it may have a brief rebound as investors buy the dip.
The post USD/CAD Forecast: Signal as Canadian Dollar Rally Gains Momentum appeared first in UK on InvestingCube .
