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USD/CAD sets to recapture 1.3800 amid a risk-off mood ahead of Powell’s speech.
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Fed policymakers support one more interest rate hike to ensure the return of inflation to 2% in a timely manner.
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Falling oil prices indicate that investors are less worried about Middle East concerns.
The USD/CAD pair extends a rally inch far from the round-level resistance of 1.3800 in the European session. The Loonie asset is expected to recapture the critical resistance of 1.3800, being supported by a strong recovery in the US Dollar due to a risk-off mood ahead of the speech from Federal Reserve (Fed) Chair Jerome Powell.
The US Dollar Index (DXY) recovery extended above 105.80 as various Fed policymakers eye another interest rate hike from the central bank to ensure consumer inflation returns to 2% on time. The 10-year US Treasury yield returned to around 4.60% amid warnings that Jerome Powell may discuss the need to raise interest rates further.
On the oil front, oil prices hit a four-month low on concerns of rising global demand. Falling oil prices indicate that investors are less concerned about Middle East concerns. It is worth noting that Canada is an oil exporter to the US and lower oil prices affect the Canadian dollar
USD/CAD recovered strongly to 1.3775 after a 23.6% Fibonacci retracement (plotted from 1.3380 as of September 9 to 1.3900 as of November 1) at 1.3775. Loonie assets have stabilized above the 50-period exponential moving average (EMA), indicating that the near-term trend has turned bullish.
The Relative Strength Index (RSI) (14) has moved into the bullish range of 60.00-80.00, indicating that a bullish momentum has been triggered.
Going forward, a decisive break above October 27 high at 1.3880 would expose the round-level resistance at 1.3900, followed by 13 October 2022 high at 1.3978.
In an alternate scenario, a breakdown below October 24 low around 1.3660 would drag the asset to the round-level support of 1.3600. A further breakdown could expose the asset to October 7 low at 1.3570.
USD/CAD two-hour chart
USD/CAD
