By Ketki Saxena
Investing.com -- The Canadian dollar extended gains against its US counterpart, as market sentiment remained upbeat following yesterday’s CPI data, and as US retail sales fell after months of gains. US PPI data too came in cooler than expected.
The recent economic data continued to boost bets that the Fed has reached its terminal rate and will begin cutting as soon as May 2024.
The recent slew of data and rising bets of the next Fed move to be a rate cut has narrowed the yield differentials between the Loonie vs. the greenback.
Looking ahead for the pair, ING analysts forecast the Loonie’s return to levels below 1.30 by the second half of 2024.
Analysts at ING write, “We expect the Loonie’s carry advantage to be slightly eroded over the course of the year, even though the structurally lower volatility compared to other high yielders should keep it a good option should market interest for carry be revamped.”
On a technical level for the pair, analysts at FX Street note, “A break [above the 1.3650] level will open up the door for a deeper bear run toward the 200-day SMA at the 1.3500 handle.”
“The Relative Strength Index (RSI) has crossed into the bottom half of the 50.0 line, inching toward oversold conditions, but there’s still plenty of room left to run in the indicator.”
“Wednesday’s additional declines in the USD/CAD set the pair up for a firm break of a rising trendline, though rejection from here would set the Loonie on the path for a return to losses.”