Technical Analysis

USD/CAD Price Analysis – April 16, 2024

By LonghornFX Technical Analysis
Apr 16, 20243 min

Daily Price Outlook

The USD/CAD currency pair has been on an upward trajectory, marking its third consecutive day of bullish movement and reaching a new high near the 1.3810 mark. This surge is driven by several factors, including diminishing expectations of a Federal Reserve (Fed) rate cut. Investor sentiment regarding a potential rate cut has decreased, supporting the US dollar as investors anticipate the Fed delaying such actions due to persistent inflation. The positive outlook for the US dollar is also strengthened by robust US Retail Sales figures, suggesting strong consumer spending that could contribute to inflation and eventual interest rate hikes.

In the meantime, the geopolitical risks have increased demand for the safe-haven USD as tensions in the Middle East, especially between Israel and Iran after a missile and drone attack, have heightened risk aversion among investors. This uncertainty has subdued sentiment in equity markets, supporting safe-haven assets like the USD and providing additional support to the USD/CAD pair.

Reduced Fed Rate Cut Bets and Geopolitical Risks Support USD/CAD Pair

As mentioned above, the bullish performance of the USD/CAD pair is supported by reduced expectations of Fed rate cuts and ongoing geopolitical risks. The market perceives that the Fed may delay rate cuts due to inflationary pressures, strengthening the US dollar and making it more attractive to investors. Furthermore, geopolitical tensions, particularly in regions like the Middle East, have increased the appeal of the USD as a safe-haven currency. Investor concerns about potential escalations in conflicts have led them to seek refuge in USD-denominated assets, contributing to the pair's upward trajectory.

Impact of Uptick in Oil Prices on the Loonie and Negative Impact on USD/CAD Pair

On the other hand, the Canadian Dollar, often referred to as the Loonie, is influenced by movements in Oil prices due to Canada's significant Oil exports. An uptick in Oil prices tends to strengthen the CAD, as it boosts Canada's export revenues and overall economic outlook. This uptick in Oil prices has provided support to the Loonie, preventing further gains for the USD/CAD pair.

USD/CAD Price Chart - Source: Tradingview
USD/CAD Price Chart - Source: Tradingview

USD/CAD - Technical Analysis

In today's trading session, the USD/CAD pair exhibited a modest gain of 0.16%, reaching $1.38057, indicating a bullish trend. The chart analysis reveals pivotal levels, with the pivot point established at $1.3779. Immediate resistance levels are noted at $1.3836, followed by $1.3891 and $1.3941. Conversely, support levels are identified at $1.3726, $1.3663, and $1.3614, highlighting crucial areas to monitor for potential price movements.

Technical indicators suggest a bullish sentiment, with the Relative Strength Index (RSI) currently at 73, signaling an overbought condition. Additionally, the 50-day Exponential Moving Average (EMA) stands at $1.3645, further supporting the bullish outlook.

Considering the prevailing market conditions, an entry price for buying is advised above $1.37804. The recommended take profit level is set at $1.38757, while a stop-loss order is suggested at $1.37193 to mitigate potential downside risks.

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