Technical Analysis

USD/CAD Price Analysis – Jan 23, 2024

By LonghornFX Technical Analysis
Jan 23, 20243 min

Daily Price Outlook 

Despite the bullish US dollar, the USD/CAD currency pair failed to halt its downward rally and remained well offered around the 1.3476 level. However, the reason for its downward trend can be attributed to the fact that WTI prices gained ground on concerns over global supply disruptions, which tend to underpin the Canadian dollar and contribute to the USD/CAD pair losses.

In the meantime, the Canadian Dollar (CAD) experienced losses against the US Dollar (USD) in the previous session, which could be attributed to the risk aversion sentiment over the escalated geopolitical situation in the Middle East.

WTI Price Surge and Geopolitical Tensions Impacting USD/CAD Pair

West Texas Intermediate (WTI) prices are on the rise, reaching around $74.70 per barrel for the second consecutive day. This surge is primarily driven by concerns about global energy supplies. Geopolitical tensions have heightened due to a drone strike on Russia's Novatek by Ukraine, and disruptions in US crude oil production caused by extreme cold weather are also contributing to the increase in prices. The upward trend in WTI prices is impacting the Canadian dollar and adding to the losses in the USD/CAD pair.

Therefore, the rise in WTI prices, driven by global energy concerns and geopolitical tensions, is pressuring the USD/CAD pair. This is mainly due to the impact on the Canadian dollar and its correlation with oil prices.

Middle East Tensions and Economic Indicators Impacting USD/CAD Pair

Furthermore, the US Dollar Index (DXY) is holding steady following recent gains. The demand for the US Dollar is influenced by a cautious approach due to heightened tensions in the Middle East. Recent military actions, such as air strikes in Yemen by the US and the UK targeting Iran-led Houthi terrorists, have prompted investors to seek safety in the US Dollar. This support is extending to the USD/CAD pair.

On another note, the US Conference Board reports a slight improvement in the Leading Economic Index for December, shifting from -0.5% in November to -0.1%. Hence, the heightened tensions in the Middle East drive demand for the US Dollar, supporting the USD/CAD pair.

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

USD/CAD - Technical Analysis

The USD/CAD pair is slightly down by 0.10%, trading at 1.34667. Key price levels to watch are the pivot point at 1.3448, which could serve as a turning point for the currency pair. Immediate resistances loom at 1.3518, 1.3611, and 1.3681, while supports are established at 1.3358, 1.3294, and 1.3195.

The RSI stands neutral at 50, suggesting a balanced market without clear overbought or oversold signals. The MACD's minor divergence, with a current value at -0.00015 below its signal at -0.00007, might indicate a slight bearish momentum. The 50-day EMA at 1.3461 is nearly aligned with the current price, offering neither bullish nor bearish conviction.

The absence of significant chart patterns suggests a market in search of direction. The short-term forecast is cautiously optimistic, proposing a buy above 1.34455, targeting a take-profit at 1.35390, with a stop-loss set at 1.33760.

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