Fundamental Analysis:
On January 29, 2025, the Bank of Canada (BoC) cut its interest rate by 25 basis points, bringing it to 3%. This decision, the sixth consecutive reduction, stems from a weak economy and persistently low inflation. Additionally, the BoC warned that the 25% tariffs the United States plans to impose on Canadian imports could cause significant economic harm. In response, the Canadian dollar weakened against the U.S. dollar, with the USD/CAD pair reaching levels near 1.4400.
Conversely, the U.S. Federal Reserve is expected to keep its interest rate unchanged in the 4.25%-4.50% range. Attention is focused on statements from Fed Chair Jerome Powell, especially regarding the impact of President Donald Trump's economic policies, such as the proposed tariffs, which could influence the future stance of monetary policy.
In summary, while the Bank of Canada continues with an expansionary monetary policy due to internal economic concerns and external threats like U.S. tariffs, the Federal Reserve maintains a more cautious stance, observing the development of trade policies and their impact on the economy. These divergences in monetary policies and trade tensions have contributed to the recent depreciation of the Canadian dollar against the U.S. dollar.
Technical Analysis
USDCAD, H2
- Supply Zones (Sell): 1.45
- Demand Zones (Buy): 1.4439, 1.4396, and 1.4330
The pair has been consolidating for just over a month after reaching March 2020 levels. However, it maintains a bullish bias, with the last validated intraday support at the 1.4369 level.
In this context, we observe a rebound in the initial sessions, breaking through supply zones at 1.4439 and 1.4465, confirming bullish dominance. Additionally, the rebound leaves a demand zone at the origin, very close to the daily opening around 1.4396, a zone that may be revisited in search of liquidity to continue purchases with targets in the average bullish range at 1.4484, 1.45, and 1.4516 in the short term.
However, a more aggressive decline below the demand zone around 1.4396 may signal bearish intent if it attempts to break the last validated intraday support at 1.4369.
Technical Summary
- Bullish Continuation Scenario: Consider buying at a price above 1.4420 and 1.44, with targets at 1.4484, 1.45 and 1.4516 in extension.
- Bearish Corrective Scenario: Sell below 1.45, with targets at 1.4470 and 1.4450, from where purchases could be considered.
- Bearish Reversal Scenario: Activated after the support at 1.4369 is broken, with the target at the demand zone of 1.4330.
Always wait for the formation and confirmation of an Exhaustion/Reversal Pattern (ERP) on the M5 timeframe, as taught here: https://t.me/spanishfbs/2258, before entering any trade in the key zones indicated.
Uncovered POC: POC = Point of Control: It is the level or zone where the highest concentration of volume occurred. If previously, a downward movement originated from it, it is considered a sell zone and forms a resistance area. Conversely, if an upward impulse originated from it, it is considered a buy zone, usually located at lows, forming support areas.
