Title: In-Depth Weekly Technical and Fundamental Outlook on USD/CAD
Source credit: Original analysis by ActionForex (https://www.actionforex.com/technical-outlook/usdcad-outlook/605844-usd-cad-weekly-outlook-420/). This extended interpretation contains enhanced commentary and further technical and fundamental insights derived from additional public financial sources and market data.
Overview
The USD/CAD currency pair experienced a week marked by uncertainty and range-bound movement. While it showed a slight resurgence early in the week, the pair ended without a definitive breakout from the established consolidation pattern. The economic developments in both the United States and Canada offered mixed signals, holding the pair within a tight trading channel.
This detailed analysis presents both technical insight and a broader macroeconomic perspective to better understand the direction of USD/CAD in the coming weeks.
Weekly Technical Overview
– USD/CAD remained inside the consolidation range that has been in place since early April, restricted largely between 1.3600 support and 1.3760 resistance.
– Price action was held below the key level of 1.3760, which serves as a descending channel resistance.
– The inability to break above that level signals a continuation of consolidation rather than the initiation of a bullish rally.
– Daily and weekly candlestick structures suggest a lack of strong directional momentum.
– The Relative Strength Index (RSI) on both daily and weekly charts remains below the 60 threshold, showing a lack of bullish pressure.
– The 55-day exponential moving average (currently near 1.3660) has served as an anchor for price action, and traders continue to monitor this technical zone for breakout signals.
Key Short-Term Levels:
– Support: 1.3600, 1.3560 (near-term horizontal support zone)
– Resistance: 1.3760 (key resistance level), 1.3800 (psychological level and bullish breakout confirmation)
Medium-Term Technical Outlook
– From a broader medium-term view, the pair is forming a potential triangle or wedge consolidation pattern.
– The range-bound movement is typical of a market awaiting a fundamental catalyst to drive breakout momentum.
– The pattern suggests compression in volatility, possibly leading to a breakout in either direction in the coming weeks.
Fibonacci Analysis:
– When applying Fibonacci retracement to the upward move from November 2022 low (1.3225) to October 2023 high (1.3898), the 38.2% retracement sits near 1.3600, a key support area.
– The 61.8% retracement at 1.3430 represents deeper support if the pair turns bearish in the short term.
Fundamental Factors Influencing USD/CAD
Federal Reserve Policy Expectations:
– The Federal Reserve continues to maintain a cautious stance regarding interest rate cuts.
– The latest FOMC minutes showed that policymakers are not yet ready to lower rates until inflation shows consistent softening.
– Recent core PCE data rose slightly, putting pressure on the Fed to sustain high interest rates for a longer period.
– As of now, market participants anticipate one or two 25 basis point cuts by the end of 2024, largely scheduled for later in the year.
Bank of Canada (BoC) Policy Path:
– The BoC surprised markets in early June by delivering its first rate cut in four years, reducing the overnight rate by 25 basis points to 4.75 percent.
– BoC Governor Tiff Macklem cited a consistent easing in core inflation metrics and signs of economic weakness as motivation for the cut.
– The Canadian economy grew just 1.8 percent in Q1 2024, lower than expectations.
– Inflation in Canada has trended downward, with the latest CPI reading coming in at 2.7 percent, within range of BoC’s 2 percent target.
Oil Prices and Canadian Dollar Correlation:
– Canada remains a major oil exporter, and the loonie (
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