Canadian Dollar Manages Weekly Gains On Bets of A Still-Hawkish Bank of Canada

© Reuters.

By Ketki Saxena

Investing.com -- The Canadian dollar edged lower against the greenback today as risk sentiment remained uncertain after the US Federal Reserve's hawkish hold earlier this week. However, the Canadian currency closed the week at a gain, its second consecutive weekly win.

The Canadian dollar got most of its impetus this week from hotter-than-expected Canadian inflation data, which raised bets of a further rate hike from the Bank of Canada.- a prospect reinforced by the BoC's Summary of Deliberations from its September 6 meeting.

Shaun Osborne, chief currency strategist at Scotiabank (TSX:BNS) notes, "Swaps are reflecting a 93% risk of a 25bps hike in January but another hot inflation report on October 17th would raise the risk of an earlier (and potentially more aggressive) move than that; the BoC’s next policy decision is October 25th."

"Canadian short-term yields have firmed and spreads versus the USD have narrowed over the past week— despite the pop in US rates following this week’s FOMC decision."

The US dollar meanwhile rallied against a basket of currencies this week, as US treasury yields surged following the Federal Reserve's monetary policy announcement on Wednesday. While the Fed held rates steady at their current range, it reiterated its higher-for-longer stance on interest rates.

On a technical level for the pair, Greg Michalowski of Forex Live notes, "The up-and-down week is ending with the price between the 100 and 200-hour MAs. The 100-hour MA is at 1.3463 and the 200-hour MA at 1.3497."

Looking ahead for the pair into next week, Michalowski notes that if "the price breaks higher and above the 200-hour moving average, the highest for the week, near 1.3525 and then the 50% midpoint at 1.3536 would be targeted."

"Conversely, if the 100-hour moving average is broken, traders would look toward the low from today's trading of 1.34214 followed by the 100-day moving average of 1.33985. The low for the week at 1.33778 if broken would open the door further downside momentum."