USD/CAD Analysis: the Rate Approaching Important Support

Bank of Canada Governor Tiff Macklem said yesterday that enough may have been done to curb inflation. As follows from his words, current policies can lead to inflation returning to the target of 2%.

The announcement fueled market and economist expectations that interest rates had peaked. It is acceptable to assume that the Bank of Canada instilled confidence in market participants, and therefore the Canadian dollar strengthened yesterday relative to other currencies.

Including relative to USD. Yesterday, by the way, data on the number of unemployment applications was published. They did not bring any surprises - the labour market continues to remain strong in the US (the actual number of applications was = 209k for the week, expected = 226k, a week ago = 233k). The news gave a reason to strengthen the USD, but overall the US dollar index is in a downward trend amid expectations of easing Fed policy.

Meanwhile, the USD/CAD chart shows that the strengthening Canadian dollar has pushed the rate closer to an important support zone; it is formed by:
→ the lower line of the ascending channel (shown in blue), in which the rate has been since August;
→ as well as the support area (shown in purple) around the level of 1.364.

At the same time, the Stoch RSI indicator dropped into the oversold zone. From the point of view of technical analysis, the chart shows the prerequisites for the formation of a rebound. If it is strong enough, the price will be able to reach the resistance of 1.375.