USD/CAD Price Analysis – Feb 13, 2024
Daily Price Outlook
During the European session on Tuesday, the USDCAD currency pair maintained its upward rally and remained well-bid around 1.3460. However, the reason for this upward trend can be attributed to the bullish US dollar. The broad-based US dollar has been gaining traction amid a combination of factors. First of all, the upbeat data from the US economy has boosted the US dollar. Meanwhile, the hawkish remarks by the Federal Reserve were seen as another key factor that kept the US dollar higher. Furthermore, the risk-off mood in the market has played a major role in underpinning the safe-haven US dollar.
In contrast to this, the upbeat WTI price, backed by heightened geopolitical tensions in the Middle East, was seen as a key factor that underpinned the Canadian Dollar, which may cap some gains in the USDCAD pair.
Fed's Cautious Stance and Potential Impact on USD/CAD Pair
Market expectations suggest a potential moderation in the US Consumer Price Index (CPI), with a YoY increase of 2.9%, down from the previous 3.4%. Monthly rates are forecasted to remain stable. Some Federal Reserve officials, like Governor Kugler and Dallas Fed President Logan, lean towards maintaining high interest rates despite signs of slowing inflation. Minneapolis Fed President Kashkari advises caution, suggesting rate cuts only if inflation trends clarify. The US Dollar Index (DXY) shows upward momentum, but subdued US Treasury yields may restrain further gains. At press time, the DXY trades around 104.20.
Therefore, the expectations of moderation in US CPI and Fed officials leaning towards high rates may support the USDCAD pair. However, subdued US Treasury yields could limit USD strength against the CAD.
Geopolitical Developments and Economic Data Impact on WTI Oil and USD/CAD Pair
On the other hand, the Canadian Dollar will likely gain support from rising crude oil prices as Canada is a major oil exporter to the US. However, the geopolitical tensions in the Middle East, particularly with Yemen's Houthi rebels launching missiles at an Iranian-bound ship, push West Texas Intermediate (WTI) oil prices up to $77.00 per barrel. Hence, the rising crude oil prices due to Middle East tensions may strengthen the Canadian Dollar against the USD, supported by Canada's oil export prominence and geopolitical factors.
USD/CAD - Technical Analysis
The USD/CAD pair exhibits marginal growth, ticking up by 0.04% to stand at 1.34562, showcasing a relatively stable performance in the forex market. As investors navigate through the nuanced landscape of currency trading, the pair's movements around the pivot point of 1.34620 are closely watched for potential shifts in momentum. Resistance levels are staged at 1.34939, 1.35139, and 1.35428, marking the barriers for upward movements. Conversely, support levels at 1.34296, 1.33991, and 1.33682 serve as key points where the pair might find a floor in case of a downturn.
Technical analysis reveals a balanced market sentiment with the Relative Strength Index (RSI) positioned at 48, indicating neither overbought nor oversold conditions. The 50-day Exponential Moving Average (EMA) at 1.34615 closely mirrors the current trading price, underscoring the currency pair's equilibrium.
Given these observations, the technical outlook for USD/CAD leans towards a cautious stance with a recommended sell limit at 1.34610. This strategic positioning aims for a take profit at 1.34133, safeguarded by a stop loss at 1.34881, to capitalize on anticipated movements while managing risk effectively. Traders and investors alike are advised to keep a vigilant eye on these key technical levels and indicators to navigate the forex market's ever-evolving dynamics.
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