USD/CAD analysis on January 30, 2025
On Thursday, amid the market's assessment of the outcome of the meetings of the US Federal Reserve and the Bank of Canada, USD/CAD continues to show moderate growth, consolidating around 1.4430. Traders are weighing the rhetoric of regulators and the potential impact of trade restrictions initiated by the administration of Donald Trump.
As expected, the US Federal Reserve left the interest rate at 4.50%, emphasizing the need to further control inflation, which accelerated from 2.7% to 2.9% in December. The introduction of new tariffs remains an additional risk to price dynamics. On February 1, 25% duties on imports from Canada and Mexico will come into force, but the US trade policy towards China and the European Union remains uncertain. Fed officials refrained from making clear comments on the timing of a possible move to lower rates, but the market's consensus forecast indicates the likelihood of policy easing in July.
The Bank of Canada, on the contrary, continued the rate reduction cycle, reducing it for the sixth time in a row — by 25 basis points to 3.0%. Last time, the regulator acted more aggressively, lowering the rate by 50 bps. At the same time, the Central Bank announced the end of the quantitative tightening program and plans to resume asset purchases from March to maintain liquidity and stimulate the economy. The head of the regulator, Tiff Macklem, said that US customs tariffs may have an impact on the Canadian economy, but they are not the main factor in the current decision to lower rates. However, he warned that the continuation of the trade conflict could lead to an acceleration of inflation and a decrease in the country's GDP growth rate: to 2.5% in 2024 and to 1.5% in 2025.
Today, investors will focus on the publication of the Personal Consumption Expenditures Index (PCE), which the Fed uses as a key indicator of inflation. According to forecasts, the indicator in December may grow from 2.4% to 2.6% in annual terms and from 0.1% to 0.3% on a monthly basis. The core index is likely to remain at 2.8%, which may affect expectations for the future trajectory of interest rates.
USD/CAD technical analysis for today
The technical picture indicates a consolidation of the pair in a wide range. The Bollinger indicator on the daily chart remains in a sideways trend, maintaining the potential for volatile movements. The MACD indicator continues to signal a possible increase — its histogram is located above the signal line. Stochastic is approaching the 80 level, which warns of the risks of a short-term overbought of the US dollar.
Trading recommendations
• Sales are possible after a breakdown of the 1.4400 support with a target of 1.4300. The stop loss is 1.4435.
• Purchases will be relevant after a rebound from 1.4400 and an upward breakdown of 1.4435. The nearest target is 1.4500. We place the stop loss at 1.4400.
While traders are assessing macroeconomic signals and the risks of trade restrictions, USD/CAD is likely to remain within the current range.