USD/CAD price hits multi-year high as market anticipates key Fed meeting
USD/CAD climbs as BoC cuts rates, USD strengthens
The USD/CAD pair surged to its highest level since April 2020, extending its rally into a third consecutive week. This rise comes on the heels of the Bank of Canada's (BoC) recent 50-basis point rate cut, its second consecutive slash, paired with a dovish policy outlook.
The BoC expressed concerns about slower economic growth in the final quarter and potential U.S. tariffs on Canadian exports, adding further pressure on the Loonie despite strengthening oil prices.
USD/CAD chart (November 2024 - December 2024) Source: Trading View
US inflation data supports USD gains
The U.S. Bureau of Labor Statistics reported a 0.4% monthly increase in November's Producer Price Index (PPI), pushing the annual PPI rate to 3%. Additionally, core PPI reached 3.4%, surpassing market expectations. These inflation figures, coupled with rising U.S. Treasury yields, have fueled speculation that the Federal Reserve may adopt a more cautious rate-cut trajectory. As a result, the U.S. Dollar hit a fresh monthly high on Thursday.
From a technical perspective, USD/CAD’s breakout above the 1.4200 level signals continued bullish potential. Immediate resistance lies near the April 2020 high of 1.4300, with the next major hurdle at 1.4365. Should this level be breached, the pair could aim for the 1.4400 round figure. On the downside, initial support is seen at 1.4155, with additional safety nets at 1.4120 and 1.4090.
Looking ahead, traders are closely watching next week’s Federal Open Market Committee (FOMC) meeting for insights into the Fed’s future policy direction. Any signs of a slower-than-expected rate cut could further bolster the U.S. Dollar and push USD/CAD to new highs.
We previously highlighted USD/CAD's bullish trend driven by U.S. Dollar strength and global rate cuts, factors that continue influencing its upward trajectory.
