• Oil fell due to fears that a potential recession could reduce fuel demand.
  • Macklem believes that the effect of increased US rates on the Canadian dollar is not a major concern.
  • The Fed is expected to lift rates again in May.

The USD/CAD outlook improved on Friday as the Canadian dollar extended losses from the previous day. On Thursday, a decline in oil prices caused the Canadian currency to weaken somewhat against the US dollar.

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Fears that a potential recession could reduce fuel demand and an increase in US gasoline inventories caused oil prices to decline.

According to Governor Tiff Macklem, the effect of increased US interest rates on the Canadian dollar is not a “major concern.” The Bank of Canada (BoC) will only respond if the loonie significantly depreciates.

When appearing before a Canadian Senate panel, Macklem was asked if the Federal Reserve’s continued rate increases may cause the Canadian dollar to weaken and hinder the BoC’s efforts to control rising inflation.

Although it has gained 0.6% against the US dollar so far this year, the Canadian dollar had lost around 11% of its value since June 2021, when inflation began to increase.

The Bank of Canada (BoC) increased interest rates at a record rate over the previous year to reduce inflation. Then it became the first major central bank to suspend monetary tightening. Its key policy rate was held at 4.50%, a 15-year high, at its most recent two policy-setting meetings.

The US Federal Reserve, also battling high inflation, has continued raising rates and is anticipated to do so again in May.

USD/CAD key events today

Investors will focus on a report from Canada on core retail sales. This report will give more insight into consumer spending and the economy’s health.

USD/CAD technical outlook: Bulls to retest the 1.3550 resistance

USD/CAD technical outlook
USD/CAD technical outlook chart

USD/CAD is rising in the 4-hour chart and looks ready to retest the 1.3550 resistance level. The bullish bias is strong here as the price trades far above the 30-SMA and the RSI in the overbought region.

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If the price gets to the 1.3550 resistance, we might see a pullback as the price is already overbought. A pullback will likely retest the 30-SMA support before the price continues climbing. The bullish bias will only change if the price breaks below the 30-SMA and the RSI goes below 50.

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Source: https://www.forexcrunch.com/usd-cad-outlook-soaring-as-oil-prices-fall/