Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.

The vast majority of retail client accounts lose money when trading CFDs.

You should consider whether you can afford to take the high risk of losing your money.

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54.76% of retail investor accounts lose money when trading CFDs / Spread betting with this provider.
Important Notice - Fraud awareness
Important Notice - Scam alert
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 54.76% of retail investor accounts lose money when trading CFDs / Spread betting with this provider. You should consider whether you understand how CFDs / Spread betting work and whether you can afford to take the high risk of losing your money.
Important Notice - Fraud awareness
Important Notice - Scam alert
The vast majority of retail investor accounts lose money when trading CFDs / Spread betting with this provider.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail investor accounts lose money when trading CFDs / Spread betting with this provider. You should consider whether you understand how CFDs / Spread betting work and whether you can afford to take the high risk of losing your money.
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Watch To See if the Fed Will Scale Back Sooner

The Fed's first interest rate meeting this year was held on Tuesday, and the outcome of the two-day meeting will be announced on Wednesday. The market is concerned about how the Federal Reserve will respond to the question and outlook of the persistently high inflation in the United States. Therefore, investors will explore the Fed’s roadmap of interest rate hikes and evaluate the pace and magnitude of interest rate hikes for this year. The market believes that the January Fed meeting will keep interest rates unchanged and maintain the reduction of the Fed’s bond-purchase plan announced last month. However, suppose the Fed accelerates the scale of its tightening cycle, this will mean a faster approach to this year’s interest rate hiking cycle to suppress the persistently high inflation in the United States.

The Canadian dollar rally is expected to continue

In the past week, the dollar recovered from 94.6 to 95.6 in response to comments from several Fed officials and some financial institutions over the pace and magnitude of interest rate hikes. In addition, the U.S. January manufacturing and service sector PMIs preliminary readings and the Conference Board consumer confidence index, combined with the new home sales announced on Wednesday before the Fed's interest rate meeting, showed strong growth. As a result, this could increase the urgency for the Fed to tighten monetary policies. 

In addition, social expectations may push the dollar higher. After the Fed's meeting on interest rates, the United States released the fourth-quarter GDP, PCE price index, initial jobless claims and the January University of Michigan consumer confidence index. The above economic data will also affect the market's assessment of the pace of monetary policy tightening at the next Fed rate meeting. Technically, after the dollar continued rising for a week, pay attention to the 10-day MA at 95.42 as short-term support. If the dollar index remains above this support level, it will continue to 96.27 and 96.56. If it breaks support, expect it to fall to  94.88 or 94.58.

Wednesday will also mark the announcement of the Bank of Canada's interest rate meeting results. It is generally believed that the Bank of Canada will maintain the interest rate level at 0.25% in response to the continued high inflation in Canada and the easing of housing prices, among other issues. But whether the central bank will take on a hawkish tone on the economic outlook and pave the way for rate hikes to begin at its next meeting. Suppose the tone of this interest rate meeting is hawkish. In that case, the Canadian dollar's rise is expected to continue, and the target of the US dollar against the Canadian dollar is 1.23 or 1.22. Conversely, if the USD/CAD keeps rising, the target is the 1.28 or 1.29 level.

Last Updated: 24/01/2022

This market commentary and analysis has been prepared for ATFX by a third party for general information purposes only. Any view expressed does not constitute a personal recommendation or solicitation to buy or sell as it does not take into account your personal circumstances or objectives, and should therefore not be interpreted as financial, investment or other advice, or relied upon as such. You should therefore seek independent advice before making any investment decisions. This information has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. We aim to establish and maintain and operate effective organisational and administrative arrangements with a view to taking all reasonable steps to prevent conflicts of interest from constituting or giving rise to a material risk of damage to the interests of our clients. The market data is derived from independent sources believed to be reliable, however we make no representation or warranty of its accuracy or completeness, and accept no responsibility for any consequence of its use by recipients. Reproduction of this information, in whole or in part, is not permitted.


 

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