**US Dollar Rally Against Canadian Dollar Faces Resistance, Says Rosenberg Research**
*Original reporting by Rosenberg Research, featured on Futunn News*
The recent surge in the US dollar (USD) against the Canadian dollar (CAD) has caught the attention of global currency markets. According to Rosenberg Research, this rally may be losing steam, having reached significant resistance levels that could mark the end—or at least a solid pause—of its upward trajectory. As macroeconomic conditions evolve, and central banks recalibrate their monetary policy stances, the USD/CAD exchange rate now stands at a critical juncture.
This article delves deeper into the core insights provided by Rosenberg Research and integrates updates and viewpoints from market analysts and institutions monitoring the North American currency pair. By examining key economic indicators, central bank policy divergence, oil market impacts, and market sentiment, a clearer picture of USD/CAD prospects can be drawn.
## Overview of Recent USD/CAD Performance
– The USD has appreciated substantially against the CAD over the past few months, driven by diverging monetary policy paths between the Federal Reserve and the Bank of Canada (BoC).
– Persistent strength in US economic data has bolstered the greenback, while the CAD has weakened partly due to mixed domestic data and fluctuating oil prices.
– As of the latest data, the USD/CAD pair is trading near 1.37–1.38, levels not sustained since early 2023.
According to Rosenberg Research, technical and fundamental signals suggest the USD’s momentum against the CAD is encountering robust resistance, potentially capping further gains in the near term.
## Rosenberg Research’s View
Rosenberg Research highlights several reasons why the recent USD rally may have reached a ceiling against the CAD:
– **Technical Resistance:** The USD/CAD exchange rate is approaching a firm resistance level around the 1.38 mark. Historically, the pair has struggled to break above this level without a strong catalyst.
– **Overbought Conditions:** Short-term technical indicators like the Relative Strength Index (RSI) show overbought conditions, implying a potential pullback.
– **Shift in Market Sentiment:** Improving sentiment in risk assets and commodities, particularly oil, may begin to support CAD from the demand side.
– **Downside in US Yields:** With recent indications that the Federal Reserve could ease rates by the end of 2024, interest rate expectations underpinning USD strength may reverse.
– **Rebalancing Flows:** Month-end and quarter-end rebalancing often favor the CAD due to Canada’s strong resource-driven trade surpluses.
## Federal Reserve Versus Bank of Canada
One of the most critical drivers of the USD/CAD pair has been the monetary policy divergence between the US Federal Reserve and the Bank of Canada.
– **Federal Reserve:**
– Maintains a cautious stance on rate cuts, emphasizing a data-dependent approach.
– Chairman Jerome Powell has reiterated that inflation must show clear progress toward the 2% target before rate reductions begin.
– As of June 2024, Fed funds futures show expectations for at least one rate cut before the end of the year, with market-implied probabilities suggesting around a 70% chance.
– **Bank of Canada:**
– The BoC surprised the market by initiating a 25 basis point rate cut in June 2024, citing weaker-than-expected domestic inflation and a softer jobs environment.
– Governor Tiff Macklem indicated that further rate cuts are likely if inflation trends continue downward.
– The Bank’s dovish pivot was seen as a CAD-negative initially but may become CAD-supportive if rate cuts successfully stimulate the domestic economy.
## Oil Price Influence on CAD
Canada remains one of the world’s top oil exporters, making the loonie especially sensitive to movements in global crude oil prices.
– **WTI Crude Oil Prices:**
– Rebounded to above $75 per barrel in recent weeks due to OPEC+
Read more on USD/CAD trading.