On Thursday USD/CAD continues its uptrend and trades near the important level of 1.3500. Over the past three days the pair strengthened by 250 pips on the background of falling oil prices and aggressive tightening of monetary policy by the Fed. In addition, investors doubt that in the current environment the Bank of Canada will continue its rate hike cycle.
Trigger for the weakening of CAD was the inflation report published earlier this week in Canada. The consumer price index fell by 0.3% in August, which was better than the forecast of 0.1%. On an annualized basis, the index slowed from 7.5% to 7.0%. The core index declined from 6.1% to 5.8%. Market participants decided that after the recent 75 basis point rate hike and slowing inflation, the Bank of Canada does not need to follow an aggressively hawkish monetary policy course. Most likely, the regulator will not raise rates until next year.
Yesterday the results of the two-day FOMC meeting were published. The Fed expectedly raised rates by 75 basis points to 3.25% - the highest mark since 2008. At the same time the Fed revised up its inflation, economy and neutral rate forecasts from 3.25% to 4.6%.
At the press-conference Jerome Powell reiterated the central bank's intention to continue its tightening of the monetary policy, despite the risks of recession.
Given the plans of the U.S. regulator, we believe that the USD will continue to grow. The Canadian dollar has no fundamental prerequisites for strong appreciation. Technical analysis, chart patterns and candlestick patterns have confirmed the upward trend of the pair.
I suggest to place a buy order for USD/CAD
Buy-limit 1.3420 take-profit 1.3600 stop-loss 1.3360
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