**USD/CAD Technical Analysis: Support Levels Halt the Downtrend Amid Market Caution**
*Based on content by Greg Michalowski. Supplemental data sourced from ForexLive, TradingView, and recent economic developments.*
The USD/CAD currency pair has seen a recent dip, encountering support that halted further declines. Traders are watching this key juncture as broader market sentiment and economic indicators provide mixed signals. In this in-depth technical analysis, we’ll examine price action, chart patterns, key support and resistance levels as well as recent economic catalysts that impact USD/CAD.
## Recent Price Action Summary
The USD/CAD pair moved lower earlier this week, reflecting some strength in the Canadian dollar combined with weakening in the US dollar. However, the decline appears to have stalled as the price approaches a notable technical support zone.
– USD/CAD’s decline was modest but notable compared to its recent range-bound action.
– The pair approached and tested the 200-hour moving average (MA), which provided important dynamic support.
– Initial sellers lost momentum at this key moving average, leading to a rebound attempt.
– The 100 and 200-hour MAs remain crucial in defining whether the pair will continue downward or rebound.
## Technical Breakdown: Key Levels and Indicators
To understand the recent movement and potential future direction of USD/CAD, it’s important to closely examine the technical setup.
### 1. Moving Averages
– **200-hour MA**: This was the key near-term support where downward pressure paused. As of the latest data, the 200-hour moving average is close to the 1.3625 level. This line has historically acted as a key fulcrum for short-term traders.
– **100-hour MA**: Now situated above current price levels, around the 1.3650 area. This acts as a near-term resistance point and will need to be broken for any upward momentum to establish.
### 2. Trendlines and Price Channels
– A bearish tilt remains in focus, with the most recent price highs showing rejection around the 1.3690 mark.
– Resistance confluences exist at the intersection of horizontal levels and descending trendlines, currently lining up near 1.3650 to 1.3667.
### 3. Fibonacci Retracement
– Retracement levels drawn from the recent swing low to high indicate important intersection points:
– 38.2% retracement around 1.3620
– 50% retracement located at 1.3595
– 61.8% retracement at 1.3570
Price action consolidating between 1.3625 and 1.3595 suggests indecision but also hints at accumulating buying interest near the midpoint of the prior uptrend.
### 4. RSI and Momentum Oscillators
– The 14-period Relative Strength Index (RSI) on the 1-hour and 4-hour chart has dipped closer to the 40 level but has not yet crossed into oversold territory.
– This suggests that while bearish momentum has slowed, there’s room for further downside unless bulls regain momentum and mount a move above 1.3650.
## Fundamental Drivers Influencing USD/CAD
Apart from technical indicators, recent moves in USD/CAD are also shaped by macroeconomic data and central bank stances.
### US Dollar Weakness
The US dollar has been broadly weaker in recent sessions, influenced by a variety of factors:
– **Fed Rate Outlook**: The Federal Reserve continues to signal a data-dependent stance, but softer American economic data in recent weeks has rekindled expectations for rate cuts in late 2024.
– **U.S. Treasury Yields**: A slight pullback in long-term bond yields has weighed on USD sentiment.
– **US Jobs Data**: Non-Farm Payrolls and unemployment numbers showed weakness, softening the dollar due to assumptions of slowing economic growth.
### Canadian Dollar Strength
The Canadian
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