Technical Analysis

USD/CAD Price Analysis – Jan 09, 2024

By LonghornFX Technical Analysis
Jan 9, 20244 min

Daily Price Outlook

During the European session on Tuesday, the USD/CAD currency pair sustained its upward rally, reaching near 1.3350. The reason for this upward trend can be attributed to the stability of the US dollar. The dollar remained steady in Asia after a slight dip from recent highs. Investors are cautious about potential rate cuts in 2024, leading to some profit-taking. Despite this, the dollar remains robust, and attention is focused on Thursday's inflation data, which might not support the idea of a quick rate cut by the Fed in March 2024, given recent positive job market data.

Meanwhile, crude oil prices steadied on Tuesday after sliding in the previous session, as markets weighed Middle East tensions against demand worries and rising OPEC supply. This supports the Lonnie and contributes to the USD/CAD currency pair losses.

Fed's Cautious Stance and Potential Impact on USD/CAD Pair

It is worth noting that the dollar index stabilized in Asia after a recent drop, driven by uncertainty about potential interest rate cuts in 2024. Despite the dip, the dollar retained most of its recent gains as investors leaned towards it ahead of Thursday's CPI inflation data. The expected mild inflation increase, combined with strong job data, challenges expectations of a Fed rate cut by March 2024. Atlanta Fed President Bostic and Fed Governor Bowman's cautious stance suggest a less aggressive approach, influencing market sentiment and potentially putting pressure on the US Dollar.

Therefore, the cautious Fed stance may weaken the US Dollar, potentially impacting the USD/CAD pair. Investors favoring the Canadian Dollar (CAD) due to reduced USD confidence could lead to a decline in the USD/CAD pair.

Geopolitical Developments and Economic Data Impact on WTI Oil and USD/CAD Pair

Moreover, West Texas Intermediate (WTI) oil is near $71 per barrel due to concerns about the Israel-Gaza conflict expanding regionally. US Secretary of State Antony Blinken's visit to Tel Aviv for discussions with Arab leaders adds to the geopolitical tension. Meanwhile, in Canada, the upcoming releases of trade balance and building permit data might impact the Canadian Dollar (CAD).

A forecasted decline in trade balance and building permits suggests potential shifts in imports, exports, and construction activities. Oil prices steadied, influenced by Middle East tensions and OPEC supply dynamics. Despite concerns, the market predicts oil trading between $75 and $80 per barrel, barring unforeseen Middle East escalations.

Therefore, the geopolitical tensions and potential economic shifts in Canada may impact the USD/CAD pair. Increased concerns favoring the Canadian Dollar (CAD) due to stable oil prices and potential positive economic data could lead to a decline in the USD/CAD pair.

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

USD/CAD - Technical Analysis 

As of Tuesday, January 9, the USD/CAD pair is exhibiting a slight upward movement, trading at 1.3340, a 0.05% increase from the previous day. This subtle rise reflects a cautiously optimistic market sentiment towards the US Dollar against the Canadian Dollar.

In the current market scenario, the USD/CAD pair navigates through a series of technical levels that define its potential path. The pivot point for the pair is set at 1.3265. Resistance levels are identified at 1.3335, followed by higher ceilings at 1.3430 and 1.3504, which could act as barriers to further upward movements. On the flip side, the pair finds immediate support at 1.3156, with subsequent support levels at 1.3089 and 1.3022, offering potential safety nets in case of a downtrend.

The Relative Strength Index (RSI) for the pair stands at 53, indicating a marginally bullish sentiment, yet not overly so. The Moving Average Convergence Divergence (MACD) records a value of -0.0005 with a signal line at 0.00148, suggesting a mixed outlook with no clear directional momentum. The current trading price is just below the 50-Day Exponential Moving Average (EMA) of 1.3360, indicating a neutral to slightly bearish short-term trend.

The USD/CAD pair shows a double top pattern extending resistance at 1.3395, a critical level that traders are monitoring closely. This pattern typically suggests a potential reversal or a pause in the upward momentum, warranting caution among investors.

Considering the above technical analysis, the overall trend for USD/CAD appears cautiously optimistic but remains neutral. For traders, a prudent strategy might involve initiating a buy position above 1.33432, targeting profits at 1.34481, and placing a stop loss at 1.33067. This approach takes into account the current technical landscape, with an emphasis on the near-term resistance and support levels.

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