Usdcad Turns Lower From Yearly High

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Usdcad Turns Lower From Yearly High

USD/CAD Turns Lower From 1.3880, Focus Shifts To Fed

The USD/CAD is slowly moving away from the 1.3880 (yearly highs), which signals buying strength in the Canadian Dollar (CAD). The drop in the USD/CAD is driven by the decline in the DYX, which has moved lower from 106.70.

The investors are now looking at how the Fed's meeting will unfold in Wednesday's session. A hawkish stance will allow the USD/CAD to revisit or even cross the yearly highs. On the contrary, a dovish stance from the Fed means the current downward trend in USD/CAD will continue.

10-Year Bond Yield Trades At 4.85%

The selling pressure in the DXY is arising from the fact that the Fed is finally done with the rate hikes. The reason cited for this opinion is that US bond yields are at historic levels. For starters, the yield for the 10-year bond (long-term) is now 4.85%, which means no more rate hikes are needed.

According to Janet Yellen from US Treasury, the rise in the US bond yields is a sign of investors' confidence in the economy of the USA. However, it also means higher interest rates for a long period of time.

Besides the Fed meeting, the markets are also looking forward to the speech of the BoC governor. Based on what they say, the markets will try to get guidance on the inflation & interest rate situation in Canada.

Given the macroeconomic & technical situation, the USD/CAD will not likely cross the 1.3880 (1-Y high). However, the Loonie remains supported by the 20 EMA, which is currently present near the 1.3715. Furthermore, the RSI indicator (14 periods) is trading in the 60 - 80 range, which is the bullish zone.

If we look at the other side, a break of 1.3660 (low of 24th October) means the pair will likely visit the 1.3600 level, which is also an important support. Any further selling momentum will send the Loonie lower towards the 1.3570.

On the daily chart, the 20 SMA is at 1.3698, while the 50 SMA is at 1.3607. In addition, the 100 SMA is at the 1.3444, and the 200 SMA is at the 1.348.

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