- The USD/CAD clings to those who got close to 1.3920 while the US dollar performs strongly.
- The Fed indicated that there was no rush for interest rate cuts.
- BOC warned that Trump's tariffs pose risks in financial stability.
The USD/CAD The pair holds the gains made on Thursday around 1.3920 during European trading hours on Friday. The loonie pair performs strongly as the US dollar (USD) boosts many tailwinds.
At the time of writing, the US Dollar Index (DXY), which monitors the value of the greenback against six major currencies, retrets from about a month high 100.85 to close to 100.40, but more than 1% in the last two days of trading.
The US dollars strengthened as Federal Reserve (FED) signed to the financial policy announcement on Wednesday that there is no rush for interest rate cuts, given high uncertainty due to new economic policies announced by United States (US) President Donald Trump. Another factor behind the stability in the US dollar is the announcement of the US-united Kingdom (UK) trade deal.
Meanwhile, investors are waiting for trade discussions between the US and China, which confirmed in Switzerland on Saturday.
In the Canadian region, the annual financial stability report from The Bank of Canada (BOC) showed on Thursday that the Trump -led trade war brings “financial stability risks”. The report also showed concerns over “household and business default credit” defaults.
The USD/CAD gets sharp after a breakout of the falling wedge chart pattern formed for a four -hour hour. Historically, a falling wedge breakout sets the stage for a bullish reversal. The pair expands its reversal above the 20-period exponential transfer of average (EMA), which is around 1.3860, indicating that the near-term trend has become bullish.
The 14-period relative index index (RSI) rises sharply to near 66.00, suggesting a strong bullish momentum.
More upside down towards April 9 low to 1.4075, followed by April 8 of less than 1.4272 appears if the pair expands its recovery above the psychological level of 1.4000
In an alternate scenario, a downside move under the psychological support of 1.3500 and the September 24 of the 1.3430 is likely if the pair breaks below the level of 1.3600.
The four -hour USD/CAD chart
US Dollar FAQ
The US dollar (USD) is the official currency of the United States of America, and the 'de facto' currency of a significant number of other countries in which it is found in circulation next to local notes. This is the most severely exchanged currency in the world, worth more than 88% of all global foreign exchange transfers, or an average of $ 6.6 trillion in transactions per day, according to data from 2022. Following World War II, the USD took from the British Pound as the world's reserve currency. For most of its history, the US dollar was gold -back, to the Bretton Woods agreement in 1971 when the gold standard left.
The most important single factor affecting the value of the US dollar is financial policy, shaped by the Federal Reserve (FED). Fed has two mandates: to achieve control inflation and promote full work. Its main tool to achieve these two goals is by organizing interest rates. When prices rise rapidly and inflation is above the target of 2% of the Fed, the Fed will increase rates, which contributes to USD value. When inflation falls below 2% or the unemployment rate is too high, the Fed may lower interest rates, with a greenback weight.
In extreme situations, the federal reserve can also print more dollars and make easing (QE) volume. QE is the process by which the Fed greatly increases the flow of credit to a stuck financial system. This is a non -standard policy proposal used when credit is dry because banks will not lend to each other (out of fear of default counterparts). This is a last way if only the decrease of interest rates is not likely to achieve the required result. It was the Fed weapon chosen to fight the credit crunch that occurred during the great financial crisis in 2008. It involves the Fed printing more dollars and used them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US dollar.
The quantity of tightening (QT) is the reverse process in which the federal reserve stops buying bonds from financial institutions and does not re -consist of the principal from the bonds it holds in new purchases. This is usually positive for the US dollar.
