USD/CAD Price Analysis – April 30, 2024
Daily Price Outlook
During the European trading session, the USD/CAD currency pair maintained its upward rally and remained well-bid around the 1.3683 level, hitting the intra-day high of 1.3701. The reason for its upward trend could be attributed to the renewed strength of the US Dollar (USD), which provided some support to the pair. However, the US dollar gained traction in the wake of growing acceptance that the Federal Reserve (Fed) will keep rates higher for longer.
Meanwhile, the decline in oil prices was seen as another key factor that kept the USD/CAD pair higher as the Canadian dollar (Loonie) is negatively affected by falling oil prices. Canada's economy relies heavily on oil exports, leading to decreased demand for the currency.
Moving ahead, Investors will keep an eye on the Canadian February Gross Domestic Product (GDP) growth number. The attention will shift to the Federal Open Market Committee's (FOMC) interest rate decision on Wednesday.
Expectation of Higher US Interest Rates Boosts USD/CAD Pair
On the US front, the US dollar gained strength as investors expect the Federal Reserve to keep interest rates high due to ongoing inflation. Fed officials, like Michelle Bowman and Neel Kashkari, don't see the need to lower rates and even suggest the possibility of no rate cuts this year. Some, like Raphael Bostic, might even consider raising rates if inflation worsens. This expectation of higher rates supports the USD, benefiting the USD/CAD pair.
The upcoming FOMC meeting is expected to maintain current rates, with investors watching for any hawkish signals in the statement and press conference, which could strengthen the US dollar further.
Therefore, the expectation of higher US interest rates due to inflation has strengthened the US dollar, benefiting the USD/CAD pair. This trend may continue if the FOMC maintains a hawkish stance.
Bank of Canada Policy Rate and Oil Prices: Impact on USD/CAD
On the Canadian front, traders anticipate that the Bank of Canada (BoC) will likely wait until June or July before considering any cuts to its policy rate. The upcoming February Gross Domestic Product (GDP) data could provide insights into the Canadian economy's performance.
If the report indicates weaker-than-expected data, the BoC might be prompted to consider interest rate cuts sooner, which could weigh on the Canadian dollar (CAD). On the flip side, if the report indicates stronger-than-expected data, the BoC may delay potential interest rate cuts, which could support the Canadian dollar (CAD).
Another factor that has been boosting the USD/CAD pair is the continued decline in oil prices. Canada's economy relies heavily on oil exports, leading to decreased demand for the currency and contributing to the USD/CAD pair's gains.
USD/CAD - Technical Analysis
On April 30, the USD/CAD traded slightly higher at 1.36811, marking an increase of 0.15%. This uptick reflects subtle shifts in market sentiment as traders respond to evolving economic indicators and geopolitical events. The currency pair now hovers just below its critical pivot point at 1.3756, indicating potential volatility in the near term.
The USD/CAD faces immediate resistance at 1.3735, with subsequent thresholds at 1.3788 and 1.3861 that could limit upward movement. Should the pair break through these barriers, it may signal strengthening momentum for the U.S. dollar against the Canadian dollar, influenced by diverging economic policies or shifts in commodity prices, particularly oil, a significant export for Canada. Conversely, the support levels are established at 1.3614, 1.3562, and 1.3516. A decline below these points could suggest growing bearish pressure, potentially due to stronger Canadian economic performance or higher crude oil prices.
Technical indicators such as the Relative Strength Index (RSI) at 52 and the 50-Day Exponential Moving Average (EMA) at 1.3701 offer additional insights. The RSI indicates a neutral momentum, suggesting that the pair is neither overbought nor oversold, while the EMA provides a benchmark for the currency’s current resistance level.
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