Title: USD/CAD Weekly Outlook: Consolidation Continues Amid Mixed Market Forces
Source: Based on the original analysis from ActionForex.com
The USD/CAD pair remains in consolidation mode, trading within a relatively tight range as markets evaluate a series of conflicting economic signals from both the United States and Canada. The currency pair has struggled to break decisively in either direction, reflecting investor uncertainty tied to interest rates, inflation expectations, oil market dynamics, and broader geopolitical tensions. This weekly outlook provides an in-depth technical and fundamental review of the USD/CAD pair by analyzing recent developments, long-term indicators, and the likely path ahead.
Original author: ActionForex.com
Current Technical Overview
USD/CAD remained in a broad range over the past week, failing to sustain momentum in either direction. Price action suggests a sideways market, with no immediate sign of a strong breakout. Below are some of the key technical developments.
Support and Resistance:
– Immediate support is found at 1.3603 (50% Fibonacci retracement of the 1.3371–1.3845 rally)
– Deeper support lies at 1.3569 and 1.3494
– Resistance seen around 1.3845 (recent swing high)
– Further resistance around 1.3898, which if broken, could open up 1.3976 and 1.4040
Technical Indicators:
– The daily Relative Strength Index (RSI) hovers around neutral territory, suggesting indecision
– MACD (Moving Average Convergence Divergence) is slightly bearish, hinting at potential for further downside pressure
– 20-day and 50-day exponential moving averages are converging, reinforcing a rangebound market
– Price continues to test the lower end of the ascending channel started in late April
Short-Term Strategy:
Traders are advised to watch for a decisive breakout of the current range before committing to a longer-term position. While there is some downside bias, current dynamics suggest waiting for confirmed price action around the 1.3600 level or a breakout above 1.3840 for better clarity.
Long-Term Technical Outlook
On the longer timeframe, USD/CAD retains a bullish inclination despite current consolidation. Year-to-date, the pair has rallied on the back of diverging economic expectations between the U.S. and Canada.
Long-term trend analysis:
– Weekly chart continues to show higher lows, indicating a gradual bullish trend since January 2024
– A breach above the 1.3845-1.3898 resistance zone would signal a continuation of this bullish trend, aiming for 1.3976
– Uptrend support lies around 1.3430, below which the bullish structure could be invalidated
Fibonacci Analysis:
– 61.8% Fibonacci retracement of the 2023 decline (1.3976 to 1.3092) sits near 1.3720, acting as a near-term pivot point
– 78.6% retracement level at 1.3860 remains key resistance for bullish continuation
Fundamental Drivers Affecting USD/CAD
1. U.S. Economic Data Indicates Resilience
Economic data out of the U.S. continues to outperform expectations, keeping the Federal Reserve cautious about interest rate cuts. While inflation has moderated slightly, core inflation remains sticky, reinforcing the stance that rates must stay high for longer.
Key data this week:
– Nonfarm Payrolls added 272K jobs in May, well above forecasts of 185K
– Unemployment rate rose slightly to 4.0% but remains historically low
– Wage growth remains robust, adding to inflationary pressures
Federal Reserve Implications:
– Market expects the Fed to possibly hold interest rates steady until Q4 2024, with minimal chances of a rate cut in July, according to the CME FedWatch Tool
– The strong labor market and resilient consumption data support a strong U.S. dollar
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