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USD / CAD Price Analysis: As US Inflation decelerates, the recovery move to approximately 1.3700 appears vulnerable

Daniel Rogers

Mar 15, 2023 11:45



After declining to approximately 1.3650, the USD / CAD pair has made a less certain rebound move. A deceleration in U.S. inflation suggests a further decline in demand for safe-haven assets in the aftermath of the Silicon Valley Bank (SVB) failure, putting the Loonie asset in jeopardy near 1.3700.


According to CNBC, Moody's Investors Service has lowered its prognosis on the entire banking system from stable to negative, causing S&P500 futures to decline in the early Asian session. The situation reveals a minor pessimism in the general risk-taking disposition.


As US inflation continues to decline, the Federal Reserve (Fed) will likely continue to raise interest rates at a slowing rate. Inflation in the United States is falling in accordance with expectations, so Fed Chairman Jerome Powell should not hurry to tighten monetary policy further.


USD / CAD has recovered after detecting a cushion close to the horizontal support derived from the March 1 high at 1.3659 on a two-hour scale. The dearth of conviction and fortitude in the US Dollar's recovery increases the likelihood of further asset losses.


The 20-period Exponential Moving Average (EMA) at 1.3710 may continue to act as a barrier for the US Dollar.


In the interim, the Relative Strength Index (RSI) (14) has protected the decline into the bearish 20.00 to 40.00 range. However, the negative bias is still evident.


A conclusive breach of the low of March 14 at 1.3652 would push the currency toward the low of March 07 at 1.3600, then the low of March 03 at 1.3555.


In an alternative scenario, a confident recovery above the high of March 14 at 1.3750 would propel the major toward the highs of March 13 above 1.3800 and March 09 at 1.3835.