USD/CAD and a Return to 1.033 in the Hands of Fed Chair Powell

It is a quiet day for the USD/CAD. There are no economic indicators from Canada to provide the Loonie with direction. However, Bank of Canada Senior Deputy Governor Rogers could move the dial late in the day.

Following Wednesday’s 75-basis point rate hike, the markets will now look for clues on what to expect in the coming months. The Bank of Canada’s statement noted that interest rates will need to rise further but held back from giving clues on whether hikes would continue to outsize traditional moves.

Any talk of another sizeable hike would weigh on the USD/CAD. However, Fed Chair Powell will speak before Deputy Governor Rogers. Hawkish comments and positive US economic indicators could mute the impact of any hawkish BoC chatter on the USD/CAD pair.

USD/CAD Price Action

At the time of writing, the USD/CAD was up 0.13% to 1.31335. A mixed morning saw the USD/CAD fall to a low of 1.31050 before rising to a high of 1.31483.

Technical Indicators

The USD/CAD will need to move through the 1.3145 pivot to target the First Major Resistance Level (R1) at 1.3180 and the Wednesday high of 1.32087.

With the markets looking ahead to Fed Chair Powell’s speech, the USD/CAD will likely find support. The Fed Chair is unlikely to shift from his policy mantra of higher for longer.

In the event of a Powell-fueled extended rally, the USD/CAD should test the Second Major Resistance Level (R2) at 1.3243 with an eye on 1.33. The Third Major Resistance Level (R3) sits at 1.3342.

Failure to move through the pivot would give the bears a run at the First Major Support Level (S1) at 1.3081.

Barring a jump in crude oil prices or hawkish BoC chatter, the USD/CAD should steer clear of sub-1.3050 and the Second Major Support Level (S2) at 1.3047.

The Third Major Support Level (S3) sits at 1.2948.

Looking at the EMAs and the 4-hourly candlestick chart (below), it is a bullish signal. This morning, the USD/CAD pair stood above the 50-day EMA, currently at 1.31099.

The 50-day EMA widened from the 100-day EMA, with the 100-day EMA pulling away from the 200-day EMA, delivering bullish signals for the USD/CAD pair.

A hold above the 50-day EMA (1.3100) continues to support a return to 1.33. However, a USD/CAD fall through the 50-day EMA and S1 (1.3081) would bring the 100-day EMA (1.30540) and S2 (1.3047) into play. The 200-day EMA sits at 1.29924.

The US Session

It is a quiet day ahead on the US economic calendar, with jobless claims in the spotlight. Another fall in claims would support the Fed’s hawkish stance, which remains dollar positive.

On the monetary policy front, Fed Chair Powell could nudge the Dollar Spot Index up to 110, though Powell will need to be particularly hawkish to offer something new.