Daily Price Outlook
The USD/CAD currency pair showed positive momentum for the second consecutive day on Wednesday. In the Asian session, it briefly dipped to around 1.3260 but quickly recovered, moving closer to the three-week high it reached the day before. Despite the upward trend, bullish traders are exercising caution and waiting for sustained strength above the key 1.3300 level before considering further upward moves. However, this cautious approach reflects the market's desire for more confirmation of the pair's strength before committing to higher positions.
Fed's Rate Hike Expectations Support US Dollar Amid Credit Rating Downgrade
Despite a credit rating downgrade of the US government's credit to AA+ from AAA by Fitch, the US Dollar (USD) is still strong. This is because the Federal Reserve (Fed) is expected to raise interest rates by 25 basis points one more time. Fed Chair Jerome Powell said the economy needs to slow down and the job market needs to weaken for inflation to return to the 2% target. However, the stronger US economic data supporting the chance of more rate hikes adds to the positive feeling about the USD.
Global Risk Sentiment Weighs on Equity Markets, Benefits Safe-Haven USD
Moreover, the USD/CAD currency pair is getting further support as global risk sentiment weakens, and investors turn to the US Dollar as a safe-haven asset. However, the surge in Crude Oil prices, hitting the highest level since April 17, supports the commodity-linked Canadian Dollar (CAD) and may hold back aggressive buying of the USD/CAD pair. This could limit aggressive buying of the USD/CAD pair. Although, the decrease in US oil inventories helps balance demand worries and keeps supporting Oil prices, adding to the strength of the Canadian Dollar.
Traders should pay close attention to short-term opportunities and keep an eye on the monthly employment reports (NFP report) from the US and Canada, scheduled for release on Friday. These reports can greatly influence the movement of the USD/CAD pair.
USD/CAD - Technical Analysis
USD/CAD advanced during intraday trading, subsequently testing the crucial resistance level at 1.3300. Additionally, it approached the resistance of the 50-day SMA and tested the short-term downward secondary trend line. The RSI displayed negative signals after entering the overbought zone.
Based on these factors, we anticipate the pair to retrace lower, with a target towards the initial support at 1.3200, under the condition that the resistance at 1.3300 remains intact.
The projected trading range for today lies between the support level of 1.3200 and the resistance level of 1.3300.
Our price prediction for today suggests a likely bullish trend. Traders are advised to closely monitor the price action and consider this bullish outlook when planning their trading strategies for USD/CAD. However, prudent risk management practices should be implemented due to the dynamic nature of the market.
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