Technical Analysis

USD/CAD Price Analysis – Jan 30, 2024

By LonghornFX Technical Analysis
Jan 30, 20243 min

Daily Price Outlook 

Despite the renewed strength of the US dollar, the USD/CAD currency pair failed to stop its downward trend and remained well offered around the 1.3410 level. However, the reason for its downward trend can be attributed to the rise in oil prices, which tend to lift the commodity-linked Loonie and contributes to the USD/CAD pair losses. Moving on, Canada’s Gross Domestic Product (GDP) for November will be due on Wednesday, forecasted to expand by 0.1% MoM. Furthermore, the attention will shift to the Federal Open Market Committee (FOMC) meeting on Wednesday.

Economic Indicators and Geopolitical Factors Impacting USD/CAD Pair

It is important to highlight that the US Core Personal Consumption Expenditures Price Index (PCE), a key measure of inflation, increased by 0.2% in December, up from 0.1% previously, with a yearly rise of 2.9%, slightly lower than before. The US Dallas Fed Manufacturing Business Index for January was -27.4, indicating a decline.

The Federal Reserve will decide on interest rates soon, and experts predict a possible cut in May or June, maybe even March. Additionally, rising tensions in the Middle East, following reports of potential US military action, could lead to a stronger US dollar due to its safe-haven status.

Therefore, the potential rate cut by the Federal Reserve and geopolitical tensions could strengthen the US dollar and may help the USD/CAD pair to limit its losses.

Canadian GDP Growth and Oil Prices Amidst Fed Decision

Furthermore, Canada is anticipated to experience a slight boost in November's GDP growth, expected to rise by 0.1% from October's flat 0.0%. Meanwhile, the surge in oil prices could strengthen the Canadian dollar, which could pose a challenge for the USD/CAD pair. Therefore, the expected GDP growth in Canada and a potential rise in oil prices may strengthen the Canadian dollar, challenging the USD/CAD pair. Traders will closely monitor the Fed's decision for trading cues.

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

USD/CAD - Technical Analysis

The USD/CAD currency pair, as of January 30, is experiencing a slight decrease, trading at 1.34087, marking a downtrend of 0.05%. Analyzing the technical aspects of the pair in a 4-hour chart timeframe provides crucial insights into its current trading dynamics.

At the forefront, the pivot point is established at 1.33972, serving as a critical indicator for gauging the short-term directional bias of the pair. Resistance levels are clearly defined at 1.34660, 1.35233, and 1.35897. These points could act as significant hurdles for any bullish momentum, potentially halting upward price movements. On the contrary, support levels are positioned at 1.33468, 1.32803, and 1.32116, which could provide necessary support to the currency pair in the event of further downward pressure.

The Relative Strength Index (RSI), currently at 37, signals a leaning towards bearish momentum but not yet reaching oversold conditions. The Moving Average Convergence Divergence (MACD) further emphasizes this bearish inclination with a value of -0.0015 below its signal line at -0.0006. The 50-Day Exponential Moving Average (EMA) stands at 1.34305, slightly above the current price, suggesting a bearish trend.

A notable chart pattern is the recent violation of the upward trendline around 1.34203 by the Loonie. This breach, coupled with a close below this level, signals a potential continuation of the downward trend.

A strategic approach would be to place a sell limit order at 1.34179, with a take-profit target set at 1.33613, and a stop-loss at 1.34597 to effectively manage risks and capitalize on the current market trend.

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