30.10.2019: USD to gain bullish momentum (USDХ, USD/CAD)

30.10.2019: USD to gain bullish momentum (USDХ, USD/CAD)


The US dollar index is falling while the volatility
of major currencies has declined to a 3-month low. Meanwhile, the Canadian dollar weakened following
the announcement of the Bank of Canada interest rate decision. Now traders are waiting for the results of
the FOMC meeting. In fact, the outcome of this meeting is quite
predictable, so market participants are more interested in the post-meeting press conference. Jerome Powell and his colleagues are expected
to shed light on their further plans for the monetary policy. It will be no surprise if the bank officials
decide to put rate cuts on hold. Such a decision may prompt investors to close
their short deals and boost a rally in the US dollar. However, the further policy plans of the Federal
Reserve are unclear yet. The recent statistics from the US have indicated
that the economic growth slowed down. Ahead of the FOMC meeting, the GDP report
for the third quarter was released. Experts predicted that the annual pace of
growth would come at 1.7% following a 2% increase in the second quarter. However, the actual reading failed to come
in line with expectations. The American economy expanded by just 1.9%. Despite these signs of a slowdown, the United
States remains the leader among other developed countries and outperforms them in terms of
the GDP growth. Therefore, the demand for the American currency
and the American assets remains high. However, the US dollar opened the American
session in the negative territory. The trading range narrowed ahead of the Fed
meeting. The US dollar index was trading at 97.67. As for the Canadian economy, it shows signs
of sustainability compared to other countries. The BOC officials previously stated that despite
the trade wars, the domestic labor market and economy were in good shape. The recent data has confirmed these words. At today’s meeting of the Bank of Canada,
traders expected no rate cuts, and their expectations were confirmed. The monetary policy rate remained unchanged. However, it was a hard day for the loonie. The USD/CAD pair held steady at 1.3087 ahead
of the meetings of two central banks, but then the quotes skyrocketed. There is little chance that the Canadian dollar
will recover as the US dollar is likely to remain strong in the loner term. Besides, the Bank of Canada downgraded its
outlook for the economic growth for the nearest two years. A break of the level of 1.31 was the first
signal for investors to resume buying USD/CAD. The Canadian dollar will be able to recover
only if the price breaks the key long-term support level of 1.29. It will mean reversal of the USD/CAD bullish
trend.

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