Raising Rates by 75 Points in 1994 and 2022, is There Any Difference?
Powell wants a soft landing for inflation, as Greenspan did in 1994. But it looks like he will get a hard landing.
USD/CAD refreshes one-month high
2021-01-28 • Updated
What happened?
Fed has held the first meeting this year. The bank takes a wait and see approach and leaves both rates and QE pace unchanged while the debt is mounting. Analysts believe that no changes from Fed may be understood as an indirect light-tapering scenario. Higher real rates could be unveiled already in the next quarters. These expectations underpinned the USD.
Elsewhere, Fed’s Powell said that the US economy was still far away from full recovery during his press conference. As a result, the market sentiment worsened and drove safe-havens assets such as the USD upward.
As for the CAD side, the reduced demand for crude oil pressed down the commodity-sensitive Canadian dollar. The constantly rising virus cases added to the overall risk-averse mood as well. All eyes on US GDP and jobless claims at 15:30 MT time. Follow up!
Technical analysis
USD/CAD has just broken through the resistance of 1.2830, clearing the way up to the psychological level of 1.2900. However, the rally up should stop near this level as indicators signal a soon falling. The RSI indicator moved above the 70.00 mark, entering the overbought zone. In addition, the price has broken through the upper line of Bollinger Bands, indicating the soon pullback to the downside. Support levels are at the low of December 4 at 1.2775 and the psychological mark of 1.2700.
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Bulls Are Coming Back
The US dollar index rose to 105.40 after the Fed’s 75-basis-point key rate hike, while the stock and the crypto markets fell. However, during the past few days, investors and traders returned to risk assets as they expect inflation growth to slow. Moreover, Jerome Powell, the head of the Federal Reserve, announced the Fed might start cutting the key rate by 2024, which is the most evident hint of an upcoming market reversal.
