Making the Most of USD/CAD As Trend Shifts Upward

But, since early last week, this pair has been moving higher and moving averages have now turned into support. USD/CAD pair has risen to over a one-week high, reaching around 1.3555 after a jump in the US session, due to aggressive buying of the US Dollar. Traders are turning to safe-haven assets like the USD amid increasing US-China tensions over Taiwan and a risk-off sentiment in the markets.

In addition, there are growing expectations of further tightening with a 25 bps hike next month by the Federal Reserve, which is also boosting the USD. The CAD on the other hand, is not benefiting from the upcoming supply cuts from OPEC+ and other Oil producing countries which sent Oil surging higher more than a week ago. This is likely to lead to further upside momentum in USD/CAD , but traders may hold off on making new bets ahead of some important central bank events this week.

The Bank of Canada meeting is scheduled for Wednesday, alongside the latest US consumer inflation report CPI. The BOC is not expected to raise interest rates this month either after stopping in the previous meeting, although there might be other surprises. That will be followed by the release of the FOMC meeting minutes tomorrow, which will influence the USD price dynamics and provide new direction for the USD/CAD pair.

Traders will also look to the release of the US monthly Retail Sales figures on Friday. However, the expectation that the FED is nearing the end of its rate-hiking cycle could limit the rise of the USD and act as a headwind for the pair. We booked an USD/CAD buy signal yesterday and opened another one at the 50 SMA (yellow).