Usdcad Shows Extended Recovery

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Usdcad Shows Extended Recovery

Usd/Cad Trades At 1.3640 On Extended Recovery

The USD/CAD is trading near the 1.3640 handle as the recovery continues during Friday's session. The USD/CAD appears to be benefiting from a recovery in the USD as the Fed has issued hawkish guidance for the interest rates.

After the comments from the Fed, the DXY moved from 104.00 to around 104.75 on Thursday. Additionally, the market's sentiment has also turned cautious as the Fed believes that just one inflation reading is not enough to go ahead with rate cuts.

It looks like the US Federal Reserve is not convinced that the disinflation trend is steady. That's why they want to wait for more inflation readings to build up the confidence.

Us 10y Bond Yields At 4.39%

The current scenario is favorable for the USD as the interest rate is expected to stay high. As a result, the 10-year bond yields have risen towards 4.39% while the DXY is also in positive territory. Meanwhile, the S&P 500 futures are on the back foot in a sour market mood.

The investors are now waiting for the Canadian CPI (April) to understand how the Bank of Canada will handle the rate cuts. According to experts, the first rate cut from the BoC will likely happen at the June meeting.

The recent rebound in the USD/CAD has come after the pair found buying interest near the 1.2620 support zone on the D1 chart. However, the USD/CAD faces resistance near 1.3846, as that's where the bearish trendline is present.

In the short-term, the outlook for the USD/CAD remains uncertain as the pair is trading under the 20 EMA. A look at the RSI shows that it hovers in the 40 - 60 range, which hints at volatility contraction.

So, if the USD/CAD can break the 1.3685 resistance, it will lead to fresh buying momentum in the pair. As a result, the pair will then move towards the 1.3838 and the 1.3900 levels.

Another scenario is that the USD turns weak, which means the USD/CAD moves below the 1.3600 support. If that handle is lost, the next support for the USD bulls will be at 1.3547.

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