The Canadian dollar (CAD) has experienced a retreat after briefly testing the low 1.43 range. This shift comes in the wake of a failure to maintain a notable technical breakthrough observed the previous day. The conditions appear less favorable for the CAD, as sentiment remains cautious amid ongoing tariff concerns ahead of the upcoming presidential inauguration.
A conducive risk environment and narrowing short-term interest rate differentials between the United States and Canada might typically boost the CAD. However, the current outlook suggests a decline, with the fair value estimate for the USD/CAD exchanging at 1.4219, contrasting with the spot rate moving in the opposite direction.
As market participants await domestic economic data, Canada is set to release its Housing Starts figures at 8:30 AM ET. Additionally, a speech is scheduled by the Deputy Governor of the Bank of Canada, focusing on the management of the central bank’s balance sheet. Preliminary remarks will be made available at 12:30 PM ET, followed by a question-and-answer session; however, media engagement post-event is not anticipated.
Despite earlier momentum, the CAD struggled to maintain its position below significant support levels established by the USD. Currently, the USD is trading higher, leading the CAD back towards a consolidation phase that has characterized the market since mid-December. Notable resistance levels are identified at 1.4450 to 1.4475, while support levels are observed at 1.4350 and the lower range of 1.4300 to 1.4305. This technical landscape reflects the ongoing volatility and uncertainty in the currency market.
