USD/CAD bulls step between dovish BoC, hawkish Fed

The USD/CAD bulls are moving ahead despite Tuesday’s bearish close. The US Dollar has firmed on hawkish sentiment around the US Fed again versus seemingly dovish stance adopted by the Bank of Canada.
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There is a 61.8% Fibonacci retracement level near 1.3350 below the neckline near 1.3380. However, given that the price is attempting to close higher for the day, that will leave an emphasis on the upside where eyes look to 1.3475.

Canadas’ dollar is trapped between 1.3440 and 1.3420s, below a 2-½-month high of 1.326 that was scored at the start of the month.

The US Dollar continues with its persistent comeback as the markets fear that the Fed is not as close to a lower pace as firstly thought on the back of what was regarded as a dovish outcome from the FOMC’s interest rate decision last week.

On the other hand; the Bank of Canada is expected to be the first major central bank to pause rate increases after delivering eight rate hikes in the past 11 months.

At the time of writing, the USD/CAD pair is trading at 1.3448 towards the highs of the day. The USD/CAD pair has travelled between a low of 1.3359 and 1.3448 and has been forced higher on a dovish sentiment at the Boc hiking key interest rate to 4.5% in January, the highest level in 15 years.

the US dollar is trapped up high following today’s rally as well, testing the boundaries of 104 the figure and 103.00 on the downside as per the DXY index as investors paused selling the greenback, a day after Fed Chair Powell did not change his US interest rate outlook. There is an air of nervousness considering a very strong US jobs report last week although the outlook tending to favour the downside as the Fed nears the end of its tightening cycle.

The markets are trying to price in rate cuts by the end of the year, although Fed officials keep sounding the alarm over the prospects of higher for longer inflation, dependent on data which is fueling the USD’s recovery.

The bulls are in charge while above 103.00 but the price is testing the dynamic trendline support. If this were to give way, a bearish thesis can be drawn for a continuation lower below 103.00. The USD/CAD is up high in the day’s range but the bias is to the downside.