USD/CAD Price Analysis: Dollar Poised for Significant Monthly Gain

• The dollar is on track for its most significant monthly gain since September.

• Investors will closely watch for any hints from Fed Chair Jerome Powell regarding the possibility of a rate cut in March.

• Analysts predict that Canadian GDP will show a 0.1% increase in November.

In today’s USD/CAD price analysis, the scales tilt slightly in favor of the bulls as the dollar edges higher in anticipation of the upcoming FOMC policy meeting. The greenback is gearing up for an impressive monthly surge, set to mark its most substantial gain since September.

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Meanwhile, Tuesday’s Canadian dollar reached a two-week high against its US counterpart. However, the gains were modest, occurring a day before domestic GDP data.

According to Kyle Chapman, an FX markets analyst at Ballinger & Co in London, the Canadian currency has been influenced positively by rallying equities and improved sentiment throughout the week. However, it faced resistance at the 1.34 level. Notably, with the looming Fed decision and GDP data, traders have been cautious about pushing it higher.

Markets expect the Fed to keep rates unchanged after its two-day policy meeting on Wednesday. Moreover, investors will closely watch for any hints from Fed Chair Jerome Powell regarding the possibility of a rate cut in March. Interest rate futures show a roughly 43% chance of a Fed rate cut in March. This is a decrease from 73% at the beginning of the year.

Meanwhile, analysts predict that Canadian GDP will show a 0.1% increase in November. As the domestic economy slows, the Bank of Canada is now shifting its focus towards the timing of potential rate cuts. 

USD/CAD key events today

• US ADP Non-Farm Employment Change
• Canada GDP m/m
• Fed monetary policy meeting

USD/CAD technical price analysis: Bears fight to reverse the trend

On the technical side, the USD/CAD price has fallen to the 1.3400 support level as the bearish RSI divergence plays out. The bias is bearish, with the price under the 30-SMA and the RSI in bearish territory. 

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Bears have taken over after the previous bullish trend paused at the 1.3525 resistance level. However, they are yet to find their footing below the 30-SMA. Moreover, to confirm a bearish trend, bears must start making lower lows and highs by breaking below the 1.3400 support level. However, if they fail to break below 1.3400, the price will likely climb to retest the 1.3525 resistance.

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• Source: https://www.forexcrunch.com/blog/2024/01/31/usd-cad-price-analysis-dollar-poised-for-significant-monthly-gain/