In Friday’s European session, the USD/CAD pair is trading within a tight range around 1.4400. The trading activity has been subdued due to the holiday – curtailed week, with both the US Dollar and the Canadian Dollar in a state of consolidation. The US dollar’s outlook remains firmly positive, driven by the Federal Reserve’s expected slow pace of interest rate cuts in 2025.
The US Dollar Index (DXY), which gauges the dollar’s value against six major currencies, is hovering above 108.00. The Fed’s recent signals of two interest rate cuts next year are based on confidence in the US economic outlook and improved labor market conditions.
The Canadian dollar, on the other hand, has a weak overall outlook. The Bank of Canada (BoC) has been aggressively easing its policy this year, having already reduced the key borrowing rate by 175 basis points to 3.25%. The BoC is expected to further cut rates as it grapples with growing economic risks.
The USD/CAD pair has shown a robust rally after breaking out of the ascending triangle chart pattern on a weekly basis. The upward – sloping 20 – day Exponential Moving Average (EMA) near 1.4000 indicates a bullish trend. The 14 – day Relative Strength Index (RSI) is in the bullish range of 60 – 80, suggesting strong upside momentum.
If the pair breaks above the previous week’s high of 1.4433, it could advance towards the psychological resistance of 1.4500 and the March 2020 high of 1.4668. Conversely, a downward move below the December 11 low of 1.4120 could drag the pair towards the December 4 high of around 1.4080 and the psychological support of 1.4000.
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