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Technical analysis Outlook

  

-USDCAD

-EURUSD

USDCAD

The USD/CAD exchange rate has shown interesting dynamics at the beginning of 2024. According to market analyses, the exchange rate reached a target of 1.3500 and is attempting to surpass it, with forecasts indicating a further rise towards the levels of 1.3605 and subsequently 1.3680. However, it was noted that a break below 1.3445 could reverse the trend and lead to a test of the main support at 1.3350.

From a macroeconomic perspective, a downward trend in inflation has been observed, with the core Personal Consumption Expenditures (PCE) Price Index falling below the core PCE inflation, mainly due to reduced energy and commodity prices. The persistence of a strong labor market in the United States could represent an upside risk to inflation. However, a sudden cooling of the labor market could increase unemployment and further push inflation downwards. Real GDP is projected to grow slightly below trend.

Regarding monetary policy, it is expected that the Federal Reserve might reduce interest rates without triggering inflation, a scenario known as “Goldilocks,” which could lead to a weakening of the US dollar against the major G10 currencies. The market has priced in interest rate cuts of about 150 basis points by the end of the year. The Fed’s last meeting in 2024 was undeniably accommodative, suggesting a soft economic landing for this year.

In Canada, the Canadian dollar has shown variable performance but closed the year with a gain of 2.2%. Although the Governor of the Bank of Canada, Tiff Macklem, continues to suggest the possibility of further rate hikes, traders appear skeptical and have priced in rate cuts of 100 basis points for 2024. The BoC might be prompted to cut rates in the first quarter of 2024 to prevent a deeper recession.

This information outlines a complex picture for the USD/CAD exchange rate, where the interaction between diverging monetary policies and economic developments can have a significant impact. Investors should closely monitor economic updates and central bank movements to make informed decisions in the foreign exchange market.

EURUSD

The analysis of the EUR/USD currency pair you have provided covers several crucial aspects that influence its behavior in the forex market. Here, we will deepen this analysis by examining both technical, macroeconomic, and political factors.

In-Depth Technical Analysis

– Support and Resistance Levels: Analyzing critical levels, like the immediate support at 1.0960 and resistance at 1.1080, is fundamental. A break or rebound from these levels can signal the future direction of the exchange rate.

– Technical Indicators: Tools such as moving averages, oscillators (like Stochastic or RSI), and analysis of chart formations (e.g., head and shoulders, triangles) can provide additional clues about the strength and direction of the trend.

Macroeconomic Context

– Non-Farm Employment Data: This indicator is crucial for assessing the health of the US economy. Better-than-expected data can strengthen the dollar, while data below expectations could weaken it.

– Inflation and Monetary Policy: Decreasing inflation (PCE and CPI) affects expectations of Federal Reserve policy. If inflation continues to slow, the Fed might be less aggressive in raising rates, which could influence the dollar.

Political Factors and Central Bank Decisions

– Federal Reserve (Fed): Decisions by the Fed regarding interest rates and its economic outlook are crucial. An imminent rate cut could weaken the dollar.

– European Central Bank (ECB): The ECB’s stance on maintaining interest rates and its economic assessments directly impact the euro. If the ECB suggests that the market is too optimistic about a rate cut, it could strengthen the euro.

Global Economic Factors

– Economic Situation in Europe: Economic uncertainty in Europe, influenced by factors such as economic growth, inflation, and political stability, can affect the euro.

– Global Market Dynamics: Appetite for risk and yield-seeking influence capital flows between currencies and markets. Long-term yields of government bonds also influence this dynamic.

Future Scenarios and Investment Strategies

– Tracking Economic Releases: Investors should closely follow key economic data releases and central bank statements to anticipate market movements.

– Risk Management: Accounting for the volatility and uncertainty of the forex market is vital. Risk management strategies, such as using stop-loss and take-profit orders, can help mitigate unforeseen risks.

Conclusions

In conclusion, analyzing the EUR/USD pair requires a multifaceted approach that considers both technical analysis and macroeconomic factors and political decisions. Understanding the global context and constant vigilance on market dynamics are essential for investors seeking to navigate this complex and dynamic trading environment.


Vantage does not represent or warrant that the material provided here is accurate, current, or complete, and therefore should not be relied upon as such. The information provided here, whether from a third party or not, is not to be considered as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any financial instruments; or to participate in any specific trading strategy. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. We advise any readers of this content to seek their own advice. Without the approval of Vantage, reproduction or redistribution of this information is not permitted.

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