The USD/CAD experienced a decline prior to the Thanksgiving lull, influenced by increasing expectations for forthcoming Fed rate reductions. In light of recent short-term weakness, it is important to note that major support zones are still holding firm, and the prevailing rate differentials suggest a favorable outlook for U.S. dollar strength in the future. The USD/CAD experienced a significant decline during trading on Wednesday, as much of North America begins to shift its attention towards the upcoming Thanksgiving holiday on Thursday in the United States. This indicates that the entirety of Thursday’s trading session is likely to be virtually non-existent. Consequently, it is essential to recognize that there are limits to the interpretations you can derive from this.
Anticipations regarding future Federal Reserve interest rate cuts are on the rise, with expectations for continued reductions gaining momentum. This contributes to the observed decline of the US dollar. In this context, the 1.40 level remains a critical point of focus, serving as both support and a significant psychological benchmark. The 50-day EMA is positioned right there as well. Consequently, many individuals will be closely monitoring that as well. Should the market decline past that point, the 200-day EMA is positioned around the 1.3915 level and is on an upward trajectory. I am confident that it is likely just a matter of time until buyers come back into the market; however, in the near term, it appears that the consensus is leaning towards a potential decline of the US dollar once more. This expectation lacks realism.
At the initial indications of difficulty, the US dollar is poised to regain its momentum. The upcoming days present a challenge for assessment, primarily because it is anticipated that many Americans will be absent not just on Thursday, but likely on Friday as well, with a significant number choosing not to resume work on that day. Consequently, I would advise against overanalyzing the price movements observed on Thursday and Friday. As we approach Monday and potentially Tuesday, it becomes essential to assess realistic momentum and volume trends. Should we manage to breach the 1.4150 level to the upside, it is likely that the pair will target the 1.43 level.
However, we will need to observe how the situation unfolds to determine if this scenario materializes. This pair exhibits volatility, which is not particularly unusual for its behavior. It appears we are positioning ourselves for a certain range as we anticipate the actions of the Federal Reserve. However, I maintain a positive outlook; the interest rate differential supports the US dollar and is likely to persist for a while.