Technical Analysis

USD/CAD Price Analysis – Dec 24, 2024

By LonghornFX Technical Analysis
Dec 24, 20243 min
Usdcad

Daily Price Outlook

During the European trading session on Tuesday, the USD/CAD pair saw some upward movement, climbing to an intraday high of 1.4400 after starting around 1.4396.

This increase can mainly be traced back to the US dollar, which gained momentum following comments from Federal Reserve policymakers suggesting fewer interest rate cuts next year due to a slowdown in disinflation.

However, the situation isn't all straightforward. Soft US PCE data have eased some of the inflation concerns, leaving a mixed outlook for the economy.

On the other hand, Canada’s economy showed stronger-than-expected GDP growth, while the Raw Material Price Index unexpectedly dropped, which could lend some support to the Canadian dollar. This positive economic data might help the CAD, potentially leading to a weaker USD/CAD pair in the short term.

US Economic Data and Consumer Confidence Point to Mixed Outlook for the Economy

On the US front, the broad-based US dollar saw support as Federal Reserve officials suggested there might be fewer interest rate cuts next year. This was due to a slowdown in the disinflation process, which keeps inflation concerns lingering.

Hon for October, which showed a 0.8% increase, much higher than the initial 0.2% reported. This data reflects some challenges in the US economy and could affect future economic expectations.

Meanwhile, consumer confidence also took a hit. The US Consumer Confidence Index fell by 8.1 points in December, dropping to 104.7. This decline shows that the recent rise in confidence was not sustained, with many households concerned about President-elect Trump's economic policies.

Nearly half of those surveyed feared that tariffs could raise the cost of living. These worries, along with the Federal Reserve's cautious stance on interest rate cuts in 2025 due to inflation, contribute to a more uncertain outlook for the US economy.

Canada's Mixed Economic Data Signals Potential Slowdown Ahead

On the CAD front, Canada’s GDP rose by 0.3% in October, which was better than the expected 0.1% decline. This unexpected growth shows some strength in the Canadian economy.

However, the Raw Material Price Index dropped by 0.5% in November, a sharp fall from October's 4.0% increase. This was also much lower than the anticipated 0.6% rise.

Looking ahead, Canada’s economy is expected to shrink slightly by 0.1% in November. This would mark the first monthly contraction of the year, which aligns with the Bank of Canada’s recent warnings about slower growth.

The central bank had also revised its growth forecasts downwards, reflecting concerns about weaker economic conditions.

These mixed data points suggest that while Canada’s economy showed some positive signs, there are still challenges ahead, and growth may slow in the coming months.

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

USD/CAD – Technical Analysis

The USD/CAD pair remains under modest downward pressure, trading at $1.43750, a slight decrease of 0.01%.

The key pivot point for this pair is at $1.43872, which will be critical in determining the next move. Immediate resistance is located at $1.44635, with subsequent resistance levels at $1.45197 and $1.45741.

On the downside, immediate support is found at $1.43228, followed by $1.42559 and $1.41957.

The 50-day Exponential Moving Average (EMA) is at $1.43833, very close to the current price, signaling a consolidation phase.

The Relative Strength Index (RSI) at 47 suggests neutral market sentiment, with neither bulls nor bears having a clear advantage.

A sustained break above $1.43872 could push the price toward higher resistance levels, whereas a failure to hold above immediate support at $1.43228 may lead to further declines towards the next key support at $1.42559.

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