**USD/CAD Rally Meets Resistance: A Deep Dive into Market Trends and Macro Forces**
*Originally reported by Rosenberg Research in an article on Futunn News*
The US dollar’s recent surge against the Canadian dollar (USD/CAD) appears to have lost momentum, with key indicators and economic fundamentals suggesting the rally may be running out of steam. In a note published by Rosenberg Research, the firm highlighted that the conditions supporting the stronger USD against the CAD may be fading, particularly as market participants reassess interest rate expectations and commodity prices begin to stabilize.
This article expands on Rosenberg Research’s insights while incorporating broader marketplace data, additional expert commentary, and macroeconomic trends impacting the USD/CAD currency pair. Here, we explore the critical themes driving the recent USD/CAD rally, why resistance is forming, and what traders should be watching in the weeks to come.
## Background: The USD/CAD Pair in 2024
In foreign exchange markets, the USD/CAD currency pair represents how many Canadian dollars (CAD) are needed to purchase one U.S. dollar (USD). As a commodity-linked currency, the CAD is heavily influenced by oil prices, given Canada’s status as one of the world’s largest oil exporters. Meanwhile, USD sentiment often reflects broader macroeconomic factors including interest rate expectations from the Federal Reserve, safe-haven demand, and U.S. economic performance.
Since late 2023 and into early 2024, the USD has generally appreciated against a basket of other currencies, driven in part by higher rates set by the Federal Reserve and a relatively robust U.S. economy. As of mid-2024, the USD/CAD pair rallied to levels around 1.38, but signs are now pointing toward resistance near that range.
## Rosenberg Research’s Key Observations
Economist David Rosenberg, founder of Rosenberg Research, underscored several factors suggesting that the greenback’s momentum against the loonie (the colloquial name for CAD) may be peaking:
– **Yield Differentials Narrowing**: One of the primary catalysts for the USD’s strength over recent months has been the interest rate differential between the U.S. Federal Reserve and the Bank of Canada (BoC). However, with the Fed expected to ease monetary policy and potential rate cuts hinted for late 2024 or early 2025, the rate advantage in favor of the USD is beginning to erode.
– **Commodity Prices Stabilizing**: Oil prices, which had declined earlier in the year, are beginning to find support in the $75–$80 per barrel range. A stabilizing or rising oil price is positive for the Canadian economy, as oil exports form a significant portion of GDP. Higher oil prices consequently support the CAD.
– **Technical Resistance**: The USD/CAD rally has found stiff resistance in the 1.3850–1.3900 range, failing to break higher multiple times. Technical indicators such as RSI (relative strength index) and moving averages suggest that the pair is overbought in the short term.
– **Market Positioning**: Net long positions in the USD are reaching extremes based on CFTC (Commodity Futures Trading Commission) data. Extremely crowded trades typically precede reversals or consolidations.
## Broader Economic Context
To provide more depth on this issue, let’s consider additional global and domestic forces influencing the USD/CAD exchange rate.
### U.S. Macroeconomic Landscape
– **Inflation and Interest Rates**: As of June 2024, the latest U.S. CPI reports indicate that inflation is cooling but remains above the Federal Reserve’s 2 percent target. With inflation moderating and signs of softening in the labor market, the Fed is shifting to a more dovish tone. Fed fund futures show markets are pricing in at least one 25 basis point rate cut by Q4 2024.
– **U.S. Growth Outlook**: While the American economy remains resilient,
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