Title: USD/CAD Bullish Momentum Remains Intact, Targets 1.3800 Resistance Level
Original Article Source: FxWirePro via EconoTimes
Author: EconoTimes Staff Writer
The USD/CAD pair continued to show notable bullish momentum, steadily advancing toward the psychological 1.3800 level amid supportive macroeconomic and technical drivers. The strength of the US dollar, fueled by robust economic indicators and the Federal Reserve’s relatively hawkish stance, underpins the persistent upside in the USD/CAD exchange rate. Meanwhile, the Canadian dollar struggles to find significant traction due to weakening crude oil prices and softer-than-expected Canadian economic data.
This article provides an extended update on USD/CAD’s bullish trend, contextualized with broader forex market developments, key technical levels, economic fundamentals, and potential risks. The article expands upon insights initially published by FxWirePro and builds upon them using data and analysis from authoritative financial sources including Reuters, Investing.com, DailyFX, and FXStreet.
Overview of the Current Bullish Bias in USD/CAD
The USD/CAD pair has been moving higher since mid-2023, breaking through critical resistance zones and displaying strong demand near major support levels. As of early April 2024, the pair is trading just below the 1.3800 handle, a level last visited in November 2023.
Key Drivers Behind USD/CAD’s Bullish Trend
1. Hawkish Federal Reserve Outlook
– The Federal Reserve has signaled that it is in no hurry to cut interest rates, despite progress on inflation.
– Fed Chair Jerome Powell reiterated that inflation needs clearer evidence of sustained decline before rate cuts can be considered.
– Recent US economic data, including non-farm payrolls, retail sales, and GDP growth, point toward resilient economic strength.
– This discourages rate cuts and fuels additional buying interest in the US dollar.
2. Weakness in the Canadian Dollar
– Canada’s economic output has slowed more than expected in recent months, with GDP data underperforming forecasts.
– Canadian employment growth has been tepid, and inflation data has fallen closer to the Bank of Canada’s target.
– Market participants expect that the Bank of Canada (BoC) might consider rate cuts ahead of the Fed, reducing the loonie’s allure.
– Crude oil, one of Canada’s most significant exports, has weakened after initial gains in early 2024, contributing to CAD softness.
3. Oil Market Influence
– While oil prices remain high relative to historical trends, volatility and muted demand forecasts have limited upside in crude.
– WTI crude hovers around $85 per barrel as of April 2024, having slipped from nearly $90 levels in March.
– A pullback in oil prices tends to weaken the Canadian dollar due to the close correlation between crude and the loonie.
4. Geopolitical Risk and Safe-Haven Flows
– Ongoing global uncertainties, including Middle East conflicts and trade tensions between China and the West, keep the US dollar in demand as a safe-haven asset.
– This benefits USD/CAD during periods of market unease, particularly if investors flee to safety.
Technical Analysis: USD/CAD Chart Outlook
The USD/CAD daily chart reveals a strong uptrend since early 2024, with technical indicators confirming the bullish setup.
Key Technical Observations:
– Resistance Levels:
– 1.3785 to 1.3800: Critical overhead resistance zone, a break above which could indicate a strong continuation of the bullish trend.
– 1.3860 and 1.3900: Next potential upside targets should momentum follow through beyond the 1.3800 level.
– Support Levels:
– 1.3700: Recent breakout level now acting as strong support.
– 1.3600: Former resistance turned support, providing a solid base for any pullbacks.
Read more on USD/CAD trading.