By Ketki Saxena
Investing.com – The Canadian dollar remained essentially unchanged today against the greenback today, as the US dollar retreated against most major currencies. Following last week’s rally driven by rising risk-aversion and central bank hawkishness, investors cashed in on the greenback as risk sentiment rebounded and treasury yields declined ahead of tomorrow’s all important US CPI data.
Despite today’s USD selloff, expectations are for the US Federal Reserve to stay hawkish in the near to medium term, with likely more than one rate hike on the deck for 2023, before it moves to cutting rates later this year.
Meanwhile, the Bank of Canada is also expected to now raise rates again before July, with money markets pricing in an 85% chance of a move from the BAnk of Canada, providing a tailwind for the loonie. Prior to Friday’s blockbuster Canadian jobs data, markets widely considered that the BoC had reached its terminal rate.
Marc Chandler, chief market strategist at Bannockburn Global Forex LLC notes, “In the context of the market moving closer to the Fed (Federal Reserve) view that it is getting more aggressive on U.S. rates, that pendulum is also swinging with the help of strong jobs data in favour of another hike in Canada”.
The commodity linked Canadian dollar gained little support from crude prices today, which WTI managing to eke out a gain as worries of a potentially downbeat CPI print outweighed supply concerns driven by Russian output cuts.
On a technical level, analysts at FX Street note, “USD/CAD has delivered a downside break of the Ascending Triangle chart pattern formed on a four-hour scale…. The major has slipped below the 50-period Exponential Moving Average (EMA) at 1.3385, indicating more weakness ahead.”
A downside move below February 13 low at 1.3325 will drag the Loonie asset toward February 2 low at 1.3262. A slippage below the latter will expose the asset to the horizontal support plotted from November 15 low at 1.3226.”
“On the flip side, a break above February 7 high at 1.3469 will drive the asset toward January 19 high at 1.3521 followed by January 6 low at 1.3538."