**USD/CAD Pulls Back from Session Highs, Trades Around 1.3702 – Market Overview and Analysis**
*Source: Original article by Richard Shepherd, FXDailyReport.com*
The USD/CAD currency pair began Tuesday’s trading session on an upward trajectory, climbing to a session high near 1.3750. However, the pair retraced part of its gains later in the day, edging down to hover around 1.3702 by mid-session. The shift in market momentum reflected a mix of technical repositioning, broader U.S. dollar strength, a modest recovery in oil prices, and anticipation ahead of key economic data releases later in the week.
This article dives deeper into the recent price action of USD/CAD, identifies short-term and long-term factors influencing the pair, and offers insight into how upcoming central bank decisions, commodity movements, and economic reports may shape the pair’s trajectory in the days ahead.
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**Technical Overview of USD/CAD**
As of the latest trading session, USD/CAD experienced volatility, peaking and then pulling back. Here’s a snapshot of recent price behavior and key levels:
– The pair rose to 1.3750 in early trading before slipping back to the 1.3702 level later in the session.
– The price movement signals a potential short-term resistance zone near 1.3750, suggesting sellers may be defending that level.
– Bears stepped in as the pair approached July’s highs; however, the pair remains above key moving averages, indicating that the broader uptrend is still intact.
**Key Technical Levels to Watch**
– Resistance:
– Immediate resistance at 1.3730 and 1.3750. A decisive break above these levels could open the door to a push towards 1.3800, a psychological barrier.
– 1.3860 serves as a longer-term resistance zone, as indicated by past price reactions.
– Support:
– Near-term support lies at 1.3675, followed by 1.3630.
– Additional support seen at 1.3600, coinciding with the 50-day moving average, which has historically attracted buying interest.
– Indicators:
– Relative Strength Index (RSI) hovers near neutral (around 54), suggesting no extreme overbought or oversold conditions.
– Moving Average Convergence Divergence (MACD) shows a bullish crossover, albeit with limited momentum.
Market sentiment remains cautiously bullish amid technical consolidation, increasing the probability of range-bound behavior until a catalyst emerges.
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**Fundamental Drivers Influencing USD/CAD**
The USD/CAD pair is influenced by both domestic and global macroeconomic and geopolitical factors. Currently, the following forces are contributing to the pair’s moves:
**1. Strength of the U.S. Dollar**
– The U.S. Dollar Index (DXY), which tracks the greenback against a basket of major currencies, has shown renewed strength, lingering above the 106.00 mark. This strength supports USD/CAD.
– Hawkish commentary from Federal Reserve officials continues to bolster the U.S. dollar, with several policymakers signaling the need for interest rates to remain “higher for longer” in the battle against inflation.
– Market expectations have pushed potential rate cuts further into late 2024, with investors eyeing economic indicators to gauge when the Fed may begin adjusting its policy stance.
**2. Bank of Canada’s Policy Stance**
– The Bank of Canada (BoC) has adopted a more dovish tone in recent months after being among the first G7 central banks to begin hiking rates during the post-pandemic recovery.
– In June, the BoC reduced its primary policy rate by 25 basis points to 4.75 percent, marking a divergence from the Fed’s relatively hawkish stance.
– Governor Tiff Macklem stated future cuts would be data-dependent, raising uncertainty around subsequent actions.
– The Canadian dollar remains sensitive to
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