USD/CAD Forecast: Sellers Target Key Technical Levels Amid Renewed Downward Pressure
Original Author: FXStreet News Team
Source: FXStreet.com
The US dollar to Canadian dollar (USD/CAD) currency pair is facing growing selling pressure as it struggles to maintain gains above its 200-day Exponential Moving Average (EMA). This technical level has emerged as a major resistance point as the pair’s recent bullish momentum weakens. As the broader US dollar retreats and oil prices firm up, traders are reassessing short-term directional biases in the currency pair.
In this updated analysis, we explore the technical and fundamental drivers behind the recent price action in USD/CAD, review key economic data releases influencing the pair, and evaluate potential price levels to watch in the sessions ahead.
Market Snapshot and Recent Performance
On Friday, August 25, USD/CAD reversed earlier gains and traded lower after failing to hold above the 200-day EMA around 1.3490. The pair had previously risen after the release of mixed US economic data, including slightly weaker-than-expected durable goods orders but relatively firm core data metrics.
As of recent sessions, key factors influencing the currency pair include:
– A weaker US dollar amid declining Treasury yields
– Higher crude oil prices, which support the Canadian dollar
– Risk sentiment and expectations around US Federal Reserve policy
The combination of these variables has contributed to downward price pressure in USD/CAD, prompting traders to reconsider the strength of the recent recovery rally from the early August lows around 1.3170.
Technical Analysis: Resistance at Key Moving Averages
Technical indicators suggest that bears are building momentum as the pair faces resistance between the 1.3480 and 1.3500 zones. This area represents the 200-day EMA and a prior resistance level from earlier this summer.
Important technical observations inclue:
– USD/CAD briefly climbed above its 200-day EMA but failed to sustain the breakout, indicating a bull trap and renewed bearish pressure.
– The 14-day Relative Strength Index (RSI) is trading around the mid-50 zone, lacking clear directional bias. Oscillations around this level often indicate neutral momentum with a slight bearish tilt.
– The daily chart shows lower highs forming since the peak above 1.3800 in March 2023, marking the beginning of a longer-term consolidation trend.
– USD/CAD trades within a medium-term descending trend channel with prices capped by the trendline resistance near 1.3550.
– Support lies around the 20-day Simple Moving Average (SMA) near 1.3430. A break below this level could open the door to further downside towards 1.3340 and 1.3230.
Key Technical Levels:
– Resistance:
– 1.3490-1.3500 (200-day EMA, psychological level)
– 1.3550 (upper descending channel resistance, June high)
– 1.3650 (July high)
– Support:
– 1.3400 (psychological round level)
– 1.3335 (August low)
– 1.3220 (early August low)
– 1.3170 (2023 low)
Currently, price action below the 200-day EMA favors sellers, with a sustained break below short-term support likely triggering further selling extensions.
Fundamental Drivers: Fed Policy, US Data, and Crude Oil
The broader macroeconomic environment plays a central role in shaping USD/CAD movements. Market reactions in recent weeks have been dictated largely by shifting expectations for US monetary policy and the trajectory of key data points.
1. US Federal Reserve Outlook
The Federal Reserve continues to walk a delicate path between fighting inflation and avoiding a deeper economic slowdown. Federal Reserve Chair Jerome Powell’s speech at Jackson Hole in August highlighted the central bank’s
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