Technical Analysis

USD/CAD Price Analysis – June 11, 2024

By LonghornFX Technical Analysis
Jun 11, 20243 min

Daily Price Outlook

The USD/CAD currency pair has prolonged its upward trend and remained well bid around 1.3777 level, hitting the intra-day high of 1.3785 level. This upward trend can be attributed to a combination of factors, including the strength of the US dollar and the decline in the price of West Texas Intermediate (WTI) crude oil.

The US dollar still bullish amidst a hawkish sentiment surrounding the Federal Reserve. However, the anticipation of the Fed maintaining interest rates steady within the range of 5.25%-5.50% to curb inflation toward its 2% target bolsters the US dollar's position.

Simultaneously, the decline in WTI crude oil prices exerts pressure on the commodity-linked Canadian dollar (CAD). Given Canada's status as the largest oil exporter to the United States, fluctuations in oil prices significantly impact the CAD.

Hawkish Sentiment Surrounding the Fed Boosts the US Dollar and Its Impact on USD/CAD

However, the bullish performance of the USD/CAD pair is closely tied to the hawkish sentiment surrounding the Federal Reserve as the robust US jobs data for May has diminished the odds of two Federal Reserve interest rate cuts in 2024, as indicated by the CME FedWatch Tool.

This reduction in the likelihood of a rate cut, particularly in September, supports the strength of the US dollar.

Investors are closely monitoring the Federal Reserve's upcoming interest rate decision scheduled for Wednesday, anticipating the central bank to maintain rates within the current range. This anticipation of monetary policy stability underpins the bullish outlook for the US dollar, consequently driving the USD/CAD pair higher.

Decline in WTI Price Puts Pressure on Commodity-Linked Canadian Dollar and Its Impact on USD/CAD

Despite positive job growth and wage increases in Canada, the Canadian dollar (CAD) faces challenges due to a rise in the unemployment rate to 6.2%, its highest in over two years.

Canada's heavy reliance on oil exports makes it vulnerable to fluctuations in oil prices, and the recent decline in the price of West Texas Intermediate (WTI) crude oil has exacerbated pressures on the CAD.

While crude oil prices are expected to rise due to increased fuel demand this summer, the current downturn in WTI prices adds strain to the Canadian economy.

Traders are closely watching Bank of Canada Governor Tiff Macklem's upcoming speech at the Conference of Montreal 2024 for insights into inflation discussions, which could further impact the USD/CAD pair's trend.

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

USD/CAD - Technical Analysis

The USD/CAD pair saw a modest increase of 0.05%, bringing its price to $1.37648. The pivot point is established at $1.3808, acting as a crucial level that the pair is currently trading below. Immediate resistance is observed at $1.3781, which, if breached, could open the path towards the next resistance levels at $1.3808 and $1.3846.

The ability to overcome these resistance points would indicate a strengthening bullish trend. On the flip side, immediate support is identified at $1.3702, with further support levels at $1.3663 and $1.3619, providing a safety net against potential declines.

The Relative Strength Index (RSI) is positioned at 65, indicating that the pair is approaching overbought territory. This suggests that while the upward momentum is strong, there may be limited room for additional gains without a correction.

Additionally, the 50-Day Exponential Moving Average (EMA) is located at $1.3690, supporting the bullish outlook as the current price is above this critical moving average.

In conclusion, the current technical setup favors a bullish strategy. An entry price with a buy limit at $1.37496 is recommended, targeting a take profit at $1.38084 while maintaining a stop loss at $1.37160 to manage risk.

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