Technical Analysis

USD/CAD Price Analysis – Dec 05, 2023

By LonghornFX Technical Analysis
Dec 5, 20233 min

Daily Price Outlook

The USD/CAD currency pair maintained its upward trend and gained positive traction around above mid-1.3500s for the second successive day on Tuesday. However, the upward trend in the pair was supported by the downward pressure on Crude Oil prices. Simultaneously, a risk-off sentiment in the market favored the safe-haven USD, further contributing to the upward momentum in the USD/CAD pair.

Factors Pressuring the Canadian Dollar

It's worth noting that Investors are unsure if OPEC+ supply cuts will help much because of a gloomy global economy, which is expected to lower the demand for fuel. This is pushing oil prices back down, nearing the low seen in November. As a result, the Canadian Dollar (Loonie) linked to commodity prices is weakening, providing some support to the USD/CAD pair.

In the meantime, the anticipation that the Bank of Canada (BoC) might start cutting interest rates in the second quarter of 2024 also weighing on the Canadian Dollar and contributing to the gains in the USD/CAD pair.

Factors Influencing USD/CAD Pair Amid Global Uncertainty and Fed Caution

Another factor boosting the USD/CAD pair is the global preference for the US Dollar during uncertain times. However, the Federal Reserve's cautious stance is limiting the USD's potential gains. Many believe that US interest rates have peaked, and the Fed might start easing its monetary policy by March 2024. This belief is causing US Treasury bond yields to drop, restraining aggressive bets on the USD.

Consequently, this could prevent any significant upward movement in the USD/CAD pair, as traders remain cautious amid the dovish outlook for the Fed's future actions.

Looking forward, traders are now eyeing key US economic data, including ISM Services PMI and JOLTS Job Openings, along with US bond yields and overall market sentiment, to gauge USD demand.

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

USD/CAD - Technical Analysis

The USD/CAD pairing modestly ascended by 0.15%, positioning the pair at 1.35. This uptick marks a cautious optimism in the currency market as traders navigate through key technical junctures.

Technical analysis reveals that the currency pair is grappling with a pivot point at $1.3550. Should the bullish sentiment persist, the loonie could face resistance at $1.3640, with the possibility of extending gains towards $1.3720 and even $1.3765. Conversely, a shift in market dynamics could see the pair seek support at lower echelons, with $1.3480, $1.3395, and $1.3350 acting as potential cushions against further downside.

The Relative Strength Index (RSI) hovers at the midpoint of 49, a reflection of the market's indecision, perched on the brink of a directional bias. While not in the overbought or oversold regions, the RSI's proximity to the 50 mark leaves room for a swing in either direction based on forthcoming market stimuli.

The 50-Day Exponential Moving Average (EMA) stands at $1.3590, a beacon for the pair's short-term trajectory. Currently, the price’s position below the EMA leans towards a bearish outlook, yet the close margin allows for a quick shift should market sentiment change.

Chart patterns have yet to signal a definitive trend, with the absence of a clear symmetrical triangle or upward channel formation. Such patterns could indicate potential bullish momentum, yet their absence leaves the future uncertain.

In conclusion, the USD/CAD’s movement suggests a bearish tilt as long as the price action stays below the 1.3570 threshold. The near-term forecast will hinge on whether the pair can surpass this level, with resistance tests anticipated in the upcoming trading sessions.

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