The USD/CAD continues to climb, driven by bullish market sentiment, reaching a high of 1.3907 on Monday, marking the highest level in nearly a year. The general market expectation that the Federal Reserve will not adopt an aggressive easing policy has supported the strength of the US dollar. Additionally, the policy direction of the Bank of Canada has also drawn widespread market attention. Due to the bleak economic growth outlook, the Bank of Canada is expected to cut interest rates again at its December policy meeting, continuing its accommodative stance, which has kept the Canadian dollar relatively weak.
At the meeting on October 23, the Bank of Canada cut its benchmark rate by 50 basis points, marking its fourth consecutive rate cut and the largest one yet. Market analysts believe the Bank of Canada is likely to maintain a dovish policy in the coming months to continue supporting the economy. This expectation has signaled bullish indicators for USD/CAD. The current Relative Strength Index (RSI) is at 74, suggesting the pair is in the overbought zone and showing a moderate upward trend, with buying pressure still increasing. Furthermore, the histogram of the Moving Average Convergence Divergence (MACD) shows a bullish trend, further supporting the strong performance of USD/CAD.
Despite strong buying pressure indicated by technical indicators, the market should also be wary of short-term correction risks due to overbought conditions. Analysts noted that before further upward movement, USD/CAD might seek support between 1.3800 and 1.3900, a key observation point for future trends. As the market's confidence in the Bank of Canada's dovish policy strengthens, USD/CAD is likely to continue receiving support, with an upward trend expected to remain.
