Technical Analysis

USD/CAD Price Analysis – April 23, 2024

By LonghornFX Technical Analysis
Apr 23, 20244 min

Daily Price Outlook

During the European trading session on Tuesday, the USD/CAD currency pair stopped its downward trend and turned bullish, reaching an intra-day high of 1.3715 level. The upward trend can be attributed to the renewed strength of the US dollar, backed by better-than-anticipated US payrolls, increased consumer price inflation, and hawkish Federal Reserve statements. This led investors to reduce expectations for US rate cuts. Conversely, the drop in industrial produce prices can be seen as negative for the CAD currency, indicating reduced economic activity or lower demand for Canadian exports.

US Dollar Strength and Market Optimism Drive USD/CAD Pair Bullish Sentiment

On the US front, the broad-based US dollar has gained positive traction and remains strong due to expectations of fewer Federal Reserve interest rate cuts. This support for the US dollar is pushing the price of the USD/CAD pair higher. The previously released strong US payroll data, higher consumer price inflation, and hawkish Fed comments have prompted investors to reduce their bets on rate cuts. Market pricing now suggests potential rate cuts starting in September, with fewer expected cuts than initially projected. The anticipation of fewer Fed rate cuts has bolstered the US dollar and led to a rise in silver prices.

Investors and traders have been closely monitoring key economic indicators and events, such as the US S&P Global Purchasing Managers Index (PMI), US Gross Domestic Product (GDP), and US Core Personal Consumption Expenditures (PCE). Positive readings and indications of a strong economy have fueled optimism among market participants, contributing to the bullish sentiment surrounding the USD/CAD pair.

Impact of Canadian Industrial Produce Prices on USD/CAD Pair

On the data front, recent numbers from Statistics Canada showed that Canadian Industrial Produce Prices dropped by 0.8% in March, in line with expectations but lower than the revised upward figure of 1.1% from the previous month's 0.7%. This dip coincides with a fall in WTI oil prices, which is notable as Canada is a major oil exporter to the US. Looking ahead, Canada's Retail Sales data, expected on Thursday, is forecasted to improve by 0.1% in February compared to a 0.3% decline in January.

Therefore, the drop in Canadian Industrial Produce Prices and the fall in WTI oil prices could weaken the Canadian dollar against the US dollar, limiting the gains in the USD/CAD pair.

Looking ahead, market participants will continue to monitor upcoming economic data releases, including Canada's Retail Sales figures scheduled for Thursday. The consensus estimates a potential improvement in retail sales, which could offer insights into the economic recovery and its impact on the USD/CAD pair's trajectory.

USD/CAD Price Chart - Source: Tradingview
USD/CAD Price Chart - Source: Tradingview

USD/CAD - Technical Analysis

The USD/CAD pair saw a modest increase on April 23, finishing the trading day at 1.37023, a slight uptick of 0.05%. This marginal gain indicates a restrained bullish sentiment as traders evaluate key technical levels for future direction.

The pivot point for the pair is established at 1.3736, suggesting a near-term resistance. The immediate resistance stands slightly lower at 1.3735, closely aligning with the pivot point, and may act as a hurdle for upward price movements. Subsequent resistance levels at 1.3788 and 1.3836 mark potential targets for bullish breakouts. On the downside, the immediate support is placed significantly lower at 1.3614, with further supports at 1.3562 and 1.3516, highlighting potential areas where the price might find a floor if downward pressure increases.

Technical indicators shed more light on the pair's dynamics. The Relative Strength Index (RSI) is at 33, hovering near the oversold territory, which could signal an upcoming rebound if buyers step in near key support levels. The 50-day Exponential Moving Average (EMA) at 1.3753 is currently above the price, indicating that the medium-term trend has been bearish but is possibly leveling off given the current price actions.

For traders looking to capitalize on these insights, a strategic approach would involve placing a buy limit order at 1.36792. This entry point is strategically chosen to optimize the potential rebound from lower support levels. The take profit target is set at 1.37363, near the pivot point, with a stop loss at 1.36380 to manage risk effectively.

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