Technical Analysis

USD/CAD Price Analysis – Dec 12, 2023

By LonghornFX Technical Analysis
Dec 12, 20234 min

Daily Price Outlook

During the European session on Tuesday, the USD/CAD currency pair is failed to stop its three-day losing streak and remained well offered around 1.3560 mark. However, this decline could be associated with the bearish US dollar. The US Dollar Index (DXY) turns negative following two days of gains. Additionally, crude oil prices are holding steady after a three-day winning streak. This stability could be supportive for the Canadian Dollar (CAD) and contributes to the declines in the USD/CAD pair. However, the positive sentiment in WTI prices is driven by confidence in the resilience of the US economy.

WTI Trades Bullish Amid Economic Resilience and Lingering Challenges

It is worth noting that West Texas Intermediate (WTI) is trading around $71.70 per barrel on Tuesday. The recent uptick in oil prices comes after last week's data release, indicating a certain resilience in the United States (US) economy.

However, there are potential challenges for crude oil prices including ongoing concerns about global demand, especially with weaker economic data from China, the world's largest oil importer, and other major economies, which could affect prices. In the meantime, worries persist about oversupply, despite efforts by OPEC+ members to cut production. These factors might put pressure on oil prices in the near term and may help the USD/CAD pair to limit its deeper losses.

USD Index Declines, FOMC Meeting Underway, and BoC Governor's Address Awaited

The US Dollar Index (DXY) is going down and staying below 104.00. This is happening despite stable US Treasury yields. The dollar got a temporary boost from good job numbers in the US. The Federal Open Market Committee (FOMC) is starting a two-day meeting on Tuesday. Most people expect that interest rates will remain unchanged. Investors will pay close attention to the FOMC statement for hints about possible rate changes next year.

Looking at Canada, it's important to note that Bank of Canada (BoC) Governor Tiff Macklem is scheduled to speak on Friday. People in the market will be paying close attention, hoping to gain insights or comments about how the Canadian economy is doing and any potential changes in monetary policy.

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

USD/CAD - Technical Analysis

As of December 12, the USD/CAD currency pair is exhibiting a minor downward trend in the Forex market, currently trading at 1.35585, a decrease of 0.12%. Analyzing the 4-hour chart provides a nuanced view of its short-term movements and potential pivot points.

In terms of key price levels, the USD/CAD pair faces immediate resistance at 1.3561. Overcoming this level could lead the pair to test further resistance at 1.3644 and potentially at 1.3701. Conversely, support levels are observed at 1.3781, 1.3504, and 1.3421. These levels will be critical in determining whether the pair can sustain its current momentum or if a reversal is imminent.

From a technical perspective, the Relative Strength Index (RSI) stands at 41, indicating a bearish sentiment in the market. This level suggests that the pair is neither in the overbought nor the oversold territory but leans towards a bearish inclination. The Moving Average Convergence Divergence (MACD) shows a value of -0.0004 with a signal line at 0.00014. The MACD line's position below the signal line hints at potential downward momentum for the USD/CAD pair, reinforcing the bearish sentiment indicated by the RSI.

The 50-Day Exponential Moving Average (EMA) for the pair is currently at 1.3576. Given that the pair's price is hovering below the 50 EMA, it signifies a short-term bearish trend. Furthermore, the chart reveals a downward channel keeping the USD/CAD pair bearish, especially below the 1.3570 support zone. A consistent close below this level could trigger further selling interest in the Canadian Dollar.

In conclusion, the overall trend for the USD/CAD pair appears bearish, particularly if it maintains below the critical 1.3570 level.

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