USD/CAD: THE BANK OF CANADA MAY BEGIN EASING MONETARY POLICY EARLIER THAN THE US FEDERAL RESERVE

Current trend

The USD/CAD pair has been moving in an uptrend since the end of last year, which is largely due to investors' disappointment with the monetary policy of the US Fed: currently, the reduction in borrowing costs is expected no earlier than June, and against the background of a slower than predicted reduction in inflation, it can even be postponed to the second half of the year. Yesterday, the head of the Atlanta Federal Reserve Bank (FRB), Raphael Bostic, said that the regulator does not need to urgently reduce interest rates, since the economy is stable and the labor market remains strong, creating risks of keeping the consumer price index (CPI) above the target level of 2.0%.

At tomorrow's meeting, the Bank of Canada is likely to keep the key rate at 5.00%, although the prerequisites for starting its decline in the national economy look more serious: in January, inflation in Canada was fixed at 2.9% compared with 3.1% in the United States over the same period, while the growth of the gross domestic product (GDP) in Q4 2023 in the USA reached 3.2%, and in Canada it was only 0.93%. In these circumstances, experts do not rule out that the Bank of Canada may begin easing monetary policy earlier than the US Fed, which will put pressure on the position of CAD in the medium term.

Support and resistance

Technically, the price forms an "ascending triangle" pattern: quotes have reached its lower border and resumed growth, the targets of which, after the breakout of the 1.3610 mark (Murrey level [7/8]), will be 1.3671 (Murrey level [8/8]) and 1.3732 (Murrey level [ 1/8]). A breakdown of the level of 1.3515 (the central line of Bollinger Bands) will allow the instrument to resume its decline to 1.3427 (Murrey level [4/8]) and 1.3366 (Murrey level [3/8]).

Technical indicators allow for further growth: Bollinger Bands are directed upwards, MACD is increasing in the positive zone, and Stochastic is reversing down from the overbought zone, which does not exclude a corrective pullback, but its potential is seen to be limited.

Resistance levels: 1.3610, 1.3671, 1.3732.

Support levels: 1.3515, 1.3427, 1.3366.

Trading tips

Long positions can be opened above 1.3610 with targets of 1.3671, 1.3732 and stop-loss around 1.3565. Implementation period: 5–7 days.

Short positions should be opened below the 1.3515 mark with targets of 1.3427, 1.3366 and