- USD/CAD offers a fresh 15-day high of 1.4350 in the midst of a strong US dollar recovery.
- Investors expect Trump’s tax agenda to be growth and inflation for the economy.
- Boc Dovish bets continue to weigh the Canadian dollars.
The USD/CAD pair continues its upward momentum for the fourth consecutive trading session, reaching a two-week high near 1.4360 on Wednesday. The U.S. dollar strengthens further as market optimism grows over President Donald Trump’s $4.5 trillion tax cut bill, which was approved by the House of Representatives on Tuesday. This development is expected to fuel inflation and boost economic expansion in the United States.
The U.S. Dollar Index (DXY), which measures the greenback’s performance against a basket of major currencies, has surged to approximately 106.60, rebounding from an 11-week low of 106.10 recorded earlier in the day.
Rising inflation and stronger economic growth are likely to encourage Federal Reserve (Fed) policymakers to maintain a tight monetary policy stance for an extended period.
Conversely, the Canadian dollar remains under pressure as investors anticipate further interest rate cuts by the Bank of Canada (BoC). The central bank has already slashed its key borrowing rate from a peak of 5% in May 2024 to nearly 3%.
Canada’s inflation rate remains below the BoC’s 2% target due to sluggish economic performance.
USD/CAD has rallied to nearly 1.4350, marking a strong rebound from the February 14 low of 1.4150. The pair has also moved above the 50-period Exponential Moving Average (EMA) around 1.4250, signaling a shift to a bullish trend.
Additionally, the 14-period Relative Strength Index (RSI) has transitioned from the 20.00-60.00 range to the 40.00-80.00 territory, reinforcing a bullish outlook.
Looking ahead, a further move beyond the February 9 high of 1.4380 could pave the way toward the psychological barrier of 1.4400 and the key resistance at 1.4500.
On the downside, if the pair breaks below its February 14 low of 1.4151, it could decline toward the December 9 low of 1.4094, with further downside potential toward the December 6 low of 1.4020.
USD/CAD four-hour chart
