Technical Analysis

USD/CAD Price Analysis – May 28, 2024

By LonghornFX Technical Analysis
May 28, 20243 min

Daily Price Outlook

During the European trading session, the USD/CAD pair has been on a downward trend, edging down to the 1.3620 level. This bearish performance can be attributed to several factors including the bearish US dollar.

Meanwhile, the Canadian Dollar is bolstered by upbeat market sentiment, which contributed to the USD/CAD pair's declines.

Impact of Weakening US Dollar on USD/CAD Pair

On the US front, the broad-based US Dollar is experiencing a weakening trend, even as traders anticipate the Federal Reserve (Fed) to keep interest rates unchanged in their upcoming September meeting. This unexpected decline in the USD's value is influencing the USD/CAD pair's performance, pushing it further down towards the support level of 1.3600.

The market sentiment remains positive, with S&P 500 futures posting gains and the US Dollar dropping for the third consecutive trading session.

Therefore, the weakening trend of the US Dollar, despite expectations of unchanged interest rates by the Fed, is pushing the USD/CAD pair lower towards the 1.3600 support level amid positive market sentiment.

Canadian Dollar Strengthens Amid Upbeat Market Sentiment

On the other hand, the Canadian Dollar (CAD) is gaining strength, capitalizing on the upbeat market sentiment. However, the near-term outlook for the CAD remains uncertain as investors anticipate the Bank of Canada (BoC) to begin interest rate cuts starting from the June meeting. This anticipation is fueled by weak household spending and easing price pressures in Canada.

Additionally, concerns about persistent inflation in Canada have eased due to lackluster consumer spending and a gloomy economic outlook. Investors will closely monitor the upcoming release of Q1 Gross Domestic Product (GDP) data, which will provide insights into the economic health of Canada and potentially impact the performance of the USD/CAD pair.

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

USD/CAD - Technical Analysis

USD/CAD is currently trading at $1.36269, reflecting a 0.12% decline on the 4-hour chart. The pivot point, set at $1.3615, is critical for determining the market direction. Immediate resistance levels are $1.3643, $1.3662, and $1.3677. On the downside, immediate support is identified at $1.3591, followed by $1.3564 and $1.3537.

The Relative Strength Index (RSI) is at 38, indicating potential bearish momentum. The 50-day Exponential Moving Average (EMA) is positioned at $1.3650, suggesting that the current price is below this short-term average, reinforcing a bearish outlook.

The outlook for USD/CAD remains bearish below the pivot point of $1.3615. Traders may consider buying above $1.36146, with a take profit target at $1.36521 and a stop loss at $1.35909.

The technical landscape suggests that USD/CAD is under pressure with limited upward momentum unless key resistance levels are breached. The RSI at 38 supports a bearish outlook, while the position below the 50-day EMA at $1.3650 adds to the bearish sentiment.

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