**Canadian Dollar Forecast: USD/CAD Positioned at Key Resistance Level Amid Broad Market Movements**
*Original Article by Rich Dvorak, ForexFactory (2024)*
*Expanded and Enhanced by AI with additional insights from reputable sources including DailyFX, Investing.com, and Bloomberg*
The Canadian dollar (CAD) finds itself under renewed pressure against its U.S. counterpart, with the USD/CAD currency pair rallying over recent trading sessions. As the exchange rate surges into a pivotal technical resistance zone, traders and investors are closely analyzing fundamental and technical factors to determine whether this marks a potential trend reversal or a continuation of USD bullish momentum.
This article provides a comprehensive 1000-word analysis of USD/CAD price action, supported by both macroeconomic data and technical chart setups to better inform your trading and investment decisions.
## Key Highlights:
– USD/CAD hits key resistance at 1.3620–1.3650
– U.S. Federal Reserve’s hawkish tone supports dollar strength
– Bank of Canada maintains dovish outlook despite recent inflation uptick
– Technical indicators show mixed momentum near major horizontal resistance
– Energy prices and risk sentiment remain important catalysts for CAD
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## Rise of the U.S. Dollar
The USD/CAD pair recently surged into a crucial resistance area between 1.3620 and 1.3650. This level has proven significant in the past, acting as a cap on bullish attempts in late 2023 and earlier this year. The recent rally corresponds with a broader resurgence of the U.S. dollar across global forex markets.
### Factors Behind USD Strength:
Several macroeconomic and geopolitical events have contributed to recent USD strength:
– **Federal Reserve Policy Outlook**: The Fed has maintained a hawkish stance, emphasizing its intention to keep interest rates higher for longer amid stubborn inflation pressures. As Federal Reserve Chairman Jerome Powell reiterated in recent public remarks, the risks of cutting rates prematurely outweigh those of leaving them elevated for an extended duration.
– **U.S. Economic Resilience**: Recent macro data have reaffirmed the robustness of the U.S. economy. The U.S. services PMI, jobless claims, durable goods orders, and inflation readings have all come in either aligned with or above expectations.
– **Safe-Haven Flows**: Ongoing geopolitical risks, such as uncertainty in the Middle East and the war in Ukraine, have triggered occasional risk-off sentiment, driving capital toward safe-haven assets like the U.S. dollar.
– **Treasury Yields**: With the U.S. 10-year yield hovering above 4.3%, the dollar has received tailwind support from fixed-income investors shifting back into Treasuries.
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## Canadian Dollar Underperformance
In contrast to the U.S. dollar’s bullish momentum, the Canadian dollar has remained subdued. Several domestic and external factors have capped CAD strength.
### Weaker Support from the Bank of Canada:
The Bank of Canada (BoC) remains decidedly dovish. Despite a slight uptick in headline inflation in early 2024, the central bank has signaled that monetary easing could begin as soon as economic data confirms a deceleration in core price pressures.
– **BoC Governor Tiff Macklem** has noted that while short-term inflation has surprised to the upside, longer-term trends suggest that the central bank’s 2% target remains achievable within its forecast horizon.
– **Labour market data** in Canada has been weak. The unemployment rate has edged higher, and wage growth has slowed in key provinces like Ontario and Quebec, suggesting reduced inflationary pressure compared to the peak levels of 2022.
### Oil Prices and CAD Correlation:
The Canadian dollar traditionally maintains a strong correlation with crude oil prices due to Canada’s status as a major oil exporter. However, the CAD has failed to gain significant support from recent upswings in WTI crude.
– **Oil prices have rallied** toward $80 per barrel due to geopolitical risks and
Read more on USD/CAD trading.