Credit: Original article by ActionForex.com
Title: In-Depth USD/CAD Daily Outlook: Bullish Momentum on Watch Amid Broader Market Dynamics
The USD/CAD currency pair continues to attract significant interest from traders and analysts as it navigates through critical technical levels. As of the most recent update from ActionForex, the pair holds a cautiously bullish posture with upside acceleration being closely monitored by market participants. This detailed analysis will dissect the current movement of USD/CAD, discuss the underlying technical factors, and provide broader context including economic indicators, central bank policies, and global oil prices influencing the currency dynamics.
Current Price Action and Technical Indicators
USD/CAD holds firm within an uptrend channel that has been developing over the past several weeks. According to the ActionForex daily outlook, the pair recently breached the 1.3653 resistance level and remains buoyed by prevailing bullish momentum. Should the pair maintain its strength and follow through with further gains, attention shifts to the next key resistance around 1.3784.
Key technical highlights from the ActionForex outlook include:
– The immediate bias remains cautiously on the upside as long as the near-term support at 1.3587 holds.
– A decisive break above 1.3784 would likely reassert the broader upward trend and open up the path toward the psychological barrier at 1.3900 and eventually the March highs around 1.3977.
– On the downside, a retreat below 1.3587 would soften the bullish stance and potentially push USD/CAD back toward 1.3465, the 38.2% retracement of the 1.3092 to 1.3784 rally.
Daily Momentum and Moving Averages:
– The pair trades comfortably above its 20-day and 50-day simple moving averages (SMAs), a sign of sustained bullish interest.
– MACD indicators remain in positive territory, reflecting continued upward momentum.
– Relative Strength Index (RSI) sits in the neutral to slightly overbought area, suggesting room for further upside before the market becomes overextended.
Broader Trend Analysis
USD/CAD has been maintaining a broader upward trend since July 2023, when it bottomed out near 1.3092. This long-term rising trajectory remains intact amid an otherwise uncertain global macroeconomic and political environment. Technical analysts view the pair’s behavior within this channel as part of a well-formed market structure.
Looking at the weekly chart:
– There is a clear upward slope in the 200-week moving average, currently positioned near 1.3350, supporting the long-term bullish bias.
– Weekly RSI is positive but not yet at an overbought level, offering room for the trend to stretch higher.
– Resistance at 1.3784 coincides with key Fibonacci extensions drawn from the early 2023 rally and retracement zones.
Fundamental Factors Shaping USD/CAD
The technical outlook for any currency pair must be evaluated against the backdrop of prevailing macroeconomic trends. For USD/CAD, several external factors are critical in determining trading volumes and price movements:
1. Divergence in Central Bank Policies
– The U.S. Federal Reserve has taken a cautious approach to any interest rate cuts throughout early and mid-2024. Following inflation data that remains above the Fed’s 2 percent target, markets have pulled back expectations of any immediate easing by the central bank.
– Chair Jerome Powell has reiterated that policy decisions will remain data-dependent, giving the U.S. dollar underlying strength against peers, including the Canadian dollar.
– In contrast, the Bank of Canada (BoC) delivered its first rate cut of the cycle in June 2024, reducing its key policy rate by 25 basis points to 4.75 percent, as inflation cooled and business investment softened.
– This policy divergence increases the interest rate differential favoring the U.S. dollar, helping to structurally support USD/CAD near higher levels.
2. Crude
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