Technical Analysis

USD/CAD Price Analysis – Jan 02, 2024

By LonghornFX Technical Analysis
Jan 2, 20243 min
Usdcad

Daily Price Outlook

During the early hours of the European session, the USD/CAD currency pair managed to halt its downward rally and gained traction around the 1.3250 level. The upward trend can be attributed to the recovery in US Treasury bond yields, assisting the US Dollar (USD) in attracting buyers for the third consecutive day. This, in turn, is viewed as a key factor providing support to the USD/CAD pair.

Meanwhile, the upticks in crude oil prices were seen as one of the key factor that underpinned the commodity-linked Loonie and cap further upside in the USD/CAD pair. Furthermore, the dovish expectations regarding the Federal Reserve (Fed) may prevent aggressive bets from USD bulls and could potentially cap the major currency pair.

Anticipated Interest Rate Cut and Economic Outlook: Impact of US Core PCE Price Index Drop

It's worth noting that investors are strongly leaning towards the idea that the US central bank might cut interest rates by March. This belief is backed by a larger-than-expected drop in the US Core Personal Consumption Expenditure (PCE) Price Index, which is the Federal Reserve's preferred measure of inflation.

Despite the robust performance of the US economy, the current situation paves the way for a gradual economic slowdown in 2024, providing the central bank with flexibility to adjust its policies earlier. The increase in US bond yields is also strengthening the US dollar, playing a role in the gains observed in the USD/CAD pair.

Canadian Dollar Dynamics: Oil Price Influence, Interest Rate Speculations, and Global Economic Factors

Moreover, the Canadian Dollar gets a boost as oil prices rise. In the meantime, the head of Canada's central bank, Tiff Macklem, hinted that they might lower interest rates in 2024. This means the Canadian Dollar relies on both oil prices and people's sentiments towards the US dollar. However, the Canadian Dollar is affected by oil and the US dollar, but it's important to be careful due to economic uncertainty.

Therefore, the potential lowering of interest rates in 2024, coupled with economic uncertainty, creates caution in assuming a continued rise of the USD/CAD pair from its recent low, emphasizing the impact of global economic factors.

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

USD/CAD - Technical Analysis 

The USD/CAD pair showed a marginal increase on Tuesday, trading at 1.32566, up by a mere 0.03%. The currency pair is navigating around a pivot point of 1.3199. Key resistance levels are identified at 1.3232, 1.3288, and 1.3322, while supports are found at 1.3143, 1.3107, and 1.3073, offering a clear framework for potential price movements.

The Relative Strength Index (RSI) is positioned at 53, suggesting a slightly bullish sentiment. The Moving Average Convergence Divergence (MACD) is marginally positive at 0.001, indicating a potential for upward momentum. The pair is currently trading just below the 50-Day Exponential Moving Average (EMA) of 1.3238, a factor that may influence its short-term trajectory.

Considering the technical analysis, the overall trend for USD/CAD appears to be cautiously bullish. A strategic approach could involve a sell limit at 1.33732, with a take profit target at 1.31427 and a stop loss at 1.35216, while keeping an eye on the mentioned technical levels for future direction.

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USD /CAD

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