Loonie Weakens On U.S Data, Canada Economy Concern

Fundamental Analysis

* U.S data drift, Canadian woes: The Canadian Loonie has fell against the dollar as stronger-than-anticipated US inflation report weigh on market sentiment. The US inflation, as measured by the Consumer Price Index (CPI), unexpectedly increased to 3.2% YoY in February, keeping the Federal Reserve (Fed) on course to wait at least until the summer before starting to cut interest rates. On the Loonie front, analysts are concerned about the economic slowdown in the Canadian economy. Moody’s Analytics stated that the Bank of Canada (BoC) is at risk of weakening the economy by not cutting interest rates sooner.

Technical Analysis

* Technical Breakout: The USD/CAD was traded higher following the recent rebound from the support level 1.34350. MACD, which illustrates ongoing bullish momentum with golden cross signal suggesting the pair to extend their gains.

* Resistance And Targets: If the bearish momentum persists, the price is likely to head back towards the resistance level of 1.35450 and potentially break above that level. Conversely, a failure to breach the level might result in a technical retracement, causing the price to trade within a range for a brief period.

Understand the concepts revolving MACD and support/resistance levels by reading our article on technical analysis.

Potential Risks

While the Fed remains the primary focus, investors are currently assessing the potential actions of the Bank of Canada (BoC). Earlier this month, the Bank of Canada (BoC) maintained the interest rate at 5%, marking the fifth consecutive meeting without changes. BoC Governor Tiff Macklem expressed concerns about core inflation and underscored that discussions about rate cuts were premature.

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Monitoring

Stay updated on Canada data, BoC related updates and any shifts in the US Dollar’s strength.

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Disclaimer: Trading derivatives involves high risks, and market conditions can change rapidly. The content is for informational purposes only and should not be considered as financial advice. Traders should conduct their own research and consider risk management strategies.