Technical Analysis

USD/CAD Price Analysis – Jan 16, 2024

By LonghornFX Technical Analysis
Jan 16, 20243 min

Daily Price Outlook 

The USD/CAD currency pair sustained its upward trend and remained well bid around the 1.3483 level. The reason for this upward trend could be attributed to the bullish US dollar. The US dollar gained ground after hawkish comments from Atlanta Fed President Raphael Bostic. Besides this, upbeat US Treasury yields were seen as another key factor that boosted the US dollar and contributed to the gains in the USD/CAD pair. Meanwhile, the Bank of Canada's Business Outlook Survey showed further declines in sentiment, undermining the Canadian dollar and contributing to the gains in the USD/CAD pair.

Canada's Sales Recovery and Economic Concerns

It's important to highlight that Canada's Wholesale and Manufacturing Sales data performed better than expected but is still on the road to recovery from recent setbacks. In November, Wholesale Sales reached a three-month high, beating forecasts at 0.9%, bouncing back from the previous month's -0.3%. Similarly, Manufacturing Sales rebounded more than anticipated, hitting a four-month high at 1.2% in November, surpassing the expected 1.0%.

However, the Bank of Canada's Business Outlook Survey for Q4 2023 revealed growing concerns among businesses regarding declining sales and persistent price pressures. Investors are now looking ahead to Tuesday's Canadian Consumer Price Index for potential inflation upticks.

Therefore, the positive Wholesale and Manufacturing Sales data may strengthen the Canadian dollar (CAD) against the US dollar (USD). However, concerns from the Business Outlook Survey could create volatility. Traders await the Canadian Consumer Price Index for further insights.

Market Impact of Martin Luther King Day and Upcoming Canadian CPI Data on USD/CAD Pair

Additionally, US markets are closed on Monday for Martin Luther King Day, leading to reduced trading activity in North America. Canadian traders are anticipating Tuesday's release of December's Consumer Price Index (CPI), expecting a year-on-year increase of 3.3%, up from November's 3.1%. However, the monthly CPI is predicted to decrease by 0.3%. This data could impact the Canadian Dollar (CAD), currently at four-week lows near 1.3400 against the US Dollar (USD).

Alongside CPI, the Bank of Canada will release the Core CPI, excluding volatile elements. In November, Core CPI showed a 0.1% monthly increase and a 2.8% year-on-year rise, influencing CAD direction and shaping expectations for the BoC's policy. Therefore, the news will lead to increased volatility in the USD/CAD pair, with the potential for CAD strength due to positive CPI data.

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

USD/CAD - Technical Analysis

On January 16th, the USD/CAD pair showed a positive trend, gaining 0.34% to reach 1.34723. The 4-hour chart highlights a key pivot point at 1.3399, with the pair encountering immediate resistance at 1.3456, followed by 1.3500 and 1.3555. On the support front, levels are established at 1.3353, 1.3294, and 1.3248.

The technical indicators for USD/CAD present a bullish outlook. The Relative Strength Index (RSI) is at 68, nearing the overbought territory but still indicative of strong buying interest. The Moving Average Convergence Divergence (MACD) shows a value of 0.001, with the signal line at 0.00216, suggesting a potential upward momentum. The 50-day Exponential Moving Average (EMA) is currently at 1.3431, which the pair has recently surpassed, reinforcing the bullish sentiment.

A notable chart pattern is the breakout from a downward trendline, indicating a shift towards a buying trend. Given these technical insights, the short-term forecast for USD/CAD appears bullish. Traders might consider a buy limit at 1.34430, aiming for a take profit at 1.35133, with a stop loss set at 1.34037. This strategy banks on the expectation that the pair will test and potentially break through the upcoming resistance levels.

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