**USD/CAD Price Analysis: Looney Inches Toward 1.3750 as US Dollar Reclaims Strength**
*Original Author: FXStreet Team | Additional analysis and context by AI*
The US Dollar to Canadian Dollar (USD/CAD) pair has displayed strong upward momentum, climbing close to the 1.3750 level after breaking above its 50-day Exponential Moving Average (EMA). This movement signals a potential continuation of bullish sentiment in the pair, supported by a resurgence in the US Dollar Index (DXY), relatively hawkish commentary from Federal Reserve policymakers, and softening oil prices—factors that historically weigh on the Canadian Dollar.
This article explores the recent performance of the USD/CAD, key technical indicators, and the macroeconomic elements influencing its direction. Additionally, we evaluate potential price targets and risks in light of upcoming data releases and economic developments.
## Key Highlights
– USD/CAD has pushed toward 1.3750, marking a continued bullish trend.
– The pair has successfully broken above its 50-day EMA, signaling short to medium-term strength.
– Hawkish Federal Reserve commentary and soft Canadian data underpin the pair’s recent movement.
– Falling crude oil prices have further pressured the Canadian Dollar.
– Upcoming macroeconomic events will play a critical role in determining the next major directional move.
## Technical Analysis Overview
USD/CAD is trading in a bullish structure, with price action demonstrating the ability to reclaim previously lost territory. The 50-day EMA, a widely followed trend indicator, was broken to the upside, providing a significant technical thesis for further gains.
### Key Technical Observations
– **Break Above the 50-day EMA**: The pair has convincingly closed above the 50-day EMA, typically interpreted as a bullish signal, prompting traders to add long positions or reduce bearish exposure.
– **Resistance and Support Levels**:
– Immediate support lies near the 1.3700 psychological level.
– The next key resistance is seen at 1.3750, followed by 1.3780, and potentially the key psychological barrier at 1.3800.
– **Momentum Indicators**:
– Relative Strength Index (RSI) is above 50 but not yet overbought, suggesting further upside room.
– Moving Average Convergence Divergence (MACD) is showing a rising histogram, further validating bullish momentum.
## Fundamental Drivers Supporting USD/CAD Bullishness
The recent uptrend is attributable to various macroeconomic and monetary policy developments favoring the USD while pressuring the CAD.
### Federal Reserve’s Hawkish Stance
– Several Fed officials, including Fed Governor Michelle Bowman and Atlanta Fed President Raphael Bostic, have reaffirmed that they remain concerned about sticky inflation.
– The tone from Fed policymakers has led markets to dial back aggressive rate cut expectations for the latter half of 2024.
– The CME FedWatch Tool shows reduced odds of a rate cut at the upcoming FOMC meetings, supporting a stronger Greenback.
### Canadian Economic Uncertainty
– Recent Canadian economic indicators have revealed a slowing economy.
– The April GDP report showed modest growth of 0.1%, missing market expectations.
– Canadian retail sales were weaker than expected, contributing to speculation that the Bank of Canada (BoC) may be inclined to cut interest rates earlier than the Fed.
– The BoC already cut interest rates by 25 basis points in June 2024, becoming the first G7 central bank to do so in the current cycle.
– This divergence in monetary policy between the Fed and BoC continues to weaken the CAD.
### Oil Price Weakness Pressures CAD
Canada is a major oil exporter, and the Canadian Dollar is typically sensitive to fluctuations in crude oil prices.
– Brent and WTI benchmarks have experienced pressure due to:
– Concerns about slowing global demand as manufacturing activity contracts in key economies (e.g., China, Germany).
– Higher-than-expected inventories
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