Technical Analysis

USD/CAD Price Analysis – Oct 10, 2023

By LonghornFX Technical Analysis
Oct 10, 20234 min

Daily Price Outlook

During the early European session on Tuesday, the USD/CAD currency pair continued its losing streak for the fourth day, trading lower at around 1.3570. However, the reason for its bearish rally could be linked to the combination of factors. First, the price of oil has been going up a lot, and that is causing problems for the USD/CAD pair. However, the increase in oil prices could be attributed to the ongoing conflict in the Gaza Strip. The ongoing issues in the Middle East are making oil prices go up because people are worried about what's happening there. Since the Canadian Dollar (CAD) is closely linked to oil prices, it's getting stronger and contributing to the losses in the USD/CAD pair.

Geopolitical Tensions Boost Oil Prices and Strengthen the Canadian Dollar

Despite a Thanksgiving holiday in Canada, the ongoing global tensions are still having a major impact. These tensions are causing Crude Oil prices to go up, mainly because people are worried about what's happening in the Middle East. This, in turn, is making the Canadian Dollar (CAD) stronger because it is closely connected to oil prices. On Monday, the price of Western Texas Intermediate (WTI) oil shot up to $86.01 per barrel, which was the biggest increase in six months. However, by Tuesday, it had come down a bit to $84.70.

US Dollar Weakening Despite Positive Job Data and Lower Bond Yields

The broad-based US dollar failed to maintained its strong gaining streak and lost some of its ground despite some positive US job data released on Friday. However, this lack of a strong dollar can be linked to a drop in US Treasury yields on Monday, especially the 10-year US Treasury bond yield, which was at 4.64% at the moment.

Furthermore, comments from Federal Reserve (Fed) officials overnight made investors less confident about the likelihood of more interest rate hikes, which led to even lower US bond yields. As a result, this situation is seen as weakening the US dollar and creating headwinds for the USD/CAD currency pair.

Dallas Fed President Lori Logan suggested there might not be a need to raise interest rates, and Fed Vice Chair Philip Jefferson emphasized the importance of caution in making any more rate increases. The US Dollar Index (DXY) has been losing value for the fifth day in a row, and it's now trading around 106.00 at the moment.

Market Sentiment Shifts Amidst Geopolitical Tensions

Despite the tensions between Hamas and Israel, the overall mood in the financial markets has turned positive. This change has lessened the appeal of the US dollar as a safe-haven currency, which has put pressure on the USD/CAD pair.

Investors will be keeping a close eye on the upcoming release of the FOMC meeting minutes scheduled for Wednesday. People are curious about how this will affect expectations regarding the Federal Reserve's next moves, which could impact the demand for the US dollar.

Traders will also be watching the US Core Producer Price Index (PPI) on Wednesday and the Consumer Price Index (CPI) on Thursday. These events are important for understanding inflation trends and the US economy.

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

USD/CAD - Technical Analysis

The USD/CAD pair has seen a decline of nearly 0.75% since the opening on Monday, with the current price at 1.3585. This movement reflects the dynamics of the US Dollar (USD) against the Canadian Dollar (CAD) and has implications for traders and investors.

Analyzing the 4-hour chart, the pivot point is at 1.3645, serving as a critical reference point. Immediate resistance levels include 1.3557, followed by 1.3500 and 1.3421. These levels represent significant barriers that may influence price action. On the support side, immediate levels are at 1.3698, with subsequent support at 1.3789 and 1.3852, indicating potential areas for reversals or continuations.

Examining technical indicators, the Relative Strength Index (RSI) registers at 34, suggesting a relatively bearish sentiment in the market. The 50-Day Exponential Moving Average (50 EMA) stands at 1.3630, indicating that the price is currently below this level, aligning with a short-term bearish trend.

One notable chart pattern is the bearish sentiment below the pivot point at 1.3645. Traders should also pay attention to the 1.3556 level, which represents the 61.8% Fibonacci retracement level. This level can act as a critical support or resistance point, depending on the price movement.

In conclusion, the overall trend for USD/CAD appears bearish, especially below the pivot point at 1.3645. Traders should closely monitor this key level for potential trading opportunities in the coming days. The short-term forecast suggests the possibility of testing the resistance at 1.3557 and beyond.

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