**USD/CAD Rally Likely Reaching Its Peak, Forecasts Rosenberg Research**
*Originally reported by Lara Silvestre, Futunn News. Additional details integrated from reputable financial sources including Bloomberg, Reuters, and Investing.com.*
The strength of the U.S. dollar (USD) against the Canadian dollar (CAD) is showing signs of losing momentum, according to a recent analysis from Rosenberg Research. The firm, led by veteran economist David Rosenberg, argued that multiple macroeconomic and technical factors suggest the USD/CAD rally may be nearing its conclusion.
The United States dollar had maintained a strong position relative to the Canadian loonie for the first part of 2024. Bolstered by a robust U.S. economy, higher interest rates from the Federal Reserve, and concerns over global growth, the USD appeared to have found sustainable support. However, analysts from Rosenberg Research now see mounting pressures that could weaken that support and eventually tip the balance in favor of the Canadian dollar.
Below is a comprehensive breakdown of the reasons Rosenberg Research anticipates a reversal in the USD/CAD trend, supported by insights from other prominent financial outlets and analysts.
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### Overview of USD/CAD Price Action in Early 2024
– Since the beginning of 2024, the USD has appreciated over 3% against the CAD.
– The rally was driven primarily by:
– Interest rate differentials favoring the U.S.
– Resilient U.S. economic data.
– Safe-haven demand in periods of global uncertainty.
– USD/CAD climbed from approximately 1.33 in early January to above 1.37 in May.
– However, more recent price behavior shows growing resistance near the 1.38 level.
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### Key Drivers Behind the USD Strength
**1. Interest Rate Differential**
– The U.S. Federal Reserve held rates elevated during Q1 and Q2 of 2024, reinforcing USD strength due to yield advantage.
– In contrast, the Bank of Canada (BoC) signaled openness to rate cuts as early as June, citing lower inflationary pressures and slowing GDP growth.
– The interest rate gap between the U.S. and Canada is a major contributor to capital flows into USD-denominated assets.
**2. Solid U.S. Economic Indicators**
– Nonfarm payrolls, consumer spending, and manufacturing indices all exceeded expectations during the first two quarters of the year.
– These resilience signals boosted confidence in the U.S. dollar as an outperforming currency among G10 economies.
– U.S. GDP growth in Q1 2024 was revised upwards to 2.1%, while Canada’s economy expanded only 1.6% during the same period.
**3. Risk Aversion and Global Tensions**
– Ongoing geopolitical concerns in Eastern Europe and the Middle East have driven investors toward safe-haven assets like the U.S. dollar.
– Emerging market volatility further raised demand for USD as a stable currency alternative.
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### Why the USD/CAD Rally May Be Running Out of Steam
According to Rosenberg Research and other analysts, several emerging factors could shift momentum in favor of the Canadian dollar. Below are the key catalysts potentially reversing the course of the pair.
#### 1. Technical Resistance and Overbought Conditions
– The USD/CAD chart is approaching critical resistance near the 1.38 level, which has historically served as a psychologically and technically significant barrier dating back to 2022.
– Technical indicators, including the Relative Strength Index (RSI), show signs of an overbought market.
– A breakout above 1.38 would require a sustained fundamental catalyst. Without that, profit-taking and bearish structure may develop.
#### 2. Oil Price Resurgence
– Canada is one of the largest net exporters of crude oil. The Canadian dollar typically strengthens in response to rising oil prices.
– According to the International Energy Agency (IEA), oil demand is recovering robustly in 202
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