Technical Analysis

USD/CAD Price Analysis – July 09, 2024

By LonghornFX Technical Analysis
Jul 9, 20244 min

Daily Price Outlook

During the European trading session, the USD/CAD pair maintained its upward trend despite the bearish US dollar. It is currently trading around the 1.3638 level, hitting an intra-day high of 1.3648.

The reason for its upward trend could be attributed to lower crude oil prices, which weighed on the Loonie and contributed to the USD/CAD pair's gains.

Meanwhile, the bearish US dollar, driven by soft employment data fueling speculation of earlier rate cuts by the Federal Reserve (Fed), was seen as a key factor that kept the lid on any additional gains in the USD/CAD pair.

Traders prefer to wait on the sidelines ahead of Powell’s semi-annual testimony and key US data. Additionally, Federal Reserve’s Michael Barr and Michelle Bowman are set to speak later on Tuesday.

Weak Canadian Employment Data and Lower Crude Oil Prices Drive Upward Trend in USD/CAD Pair

On the BoC front, the previously released weakening Canadian employment data raised expectations for rate cuts. Canada's unemployment rate rose to 6.4% in June from 6.2% in May, according to Statistics Canada.

Meanwhile, crude oil prices edged lower due to growing peace talks in the Middle East, putting selling pressure on the commodity-linked Canadian Dollar (CAD) since Canada is a major crude oil exporter to the United States. This combination of factors has contributed to the USD/CAD pair's upward trend.

US Dollar Weakens Amid Soft Employment Data and Rate Cut Speculation, Pressuring USDCAD Pair

On the US front, the broad-based US dollar is losing momentum as soft employment data fuels speculation of earlier rate cuts by the Federal Reserve (Fed). Traders are now pricing in a 76.2% probability of a rate cut in September, up from 65.5% last week, according to the CME's FedWatch Tool.

Federal Reserve Chair Jerome Powell is scheduled to testify on the economy and monetary policy to Congress, where his remarks could influence market expectations.

Meanwhile, Federal Reserve Bank of Chicago President Austan Goolsbee remarked on the challenge of returning inflation to 2%, while Powell indicated the Fed's commitment to addressing disinflationary pressures.

On the data front, US Nonfarm Payrolls rose by 206,000 in June, exceeding expectations of 190,000, following a gain of 218,000 in May. The Unemployment Rate ticked up to 4.1% from May's 4.0%, while Average Hourly Earnings decreased to a 3.9% year-over-year growth rate in June, aligning with market forecasts.

Therefore, the soft employment data and rising rate cut speculation are pressuring the USD, leading to potential weakness in the USDCAD pair as market expectations adjust accordingly.

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

USD/CAD- Technical Analysis

USD/CAD is currently trading at $1.36341 on the 2-hour chart. The pivot point is positioned at $1.36452 (Green line). Immediate resistance is observed at $1.36700, with further resistance at $1.36885 and $1.37099.

On the downside, immediate support is located at $1.36242, followed by $1.36036 and $1.35819. The 50-day Exponential Moving Average (EMA) is positioned at $1.36357, aligning closely with the current price and acting as a pivot point for potential upward or downward movements.

The Relative Strength Index (RSI) is currently at 52.52, indicating a neutral market position. This level suggests neither overbought nor oversold conditions, leaving room for potential moves in either direction.

The 50-day EMA at $1.36357 is a crucial level to watch, providing insight into the short-term trend. The alignment of the current price with the 50-day EMA suggests that any significant movement could establish a new trend direction.

For traders, a strategic entry point is recommended below $1.36452, with a take profit level set at $1.36036 and a stop loss at $1.36700. Maintaining prices below the pivot point of $1.36452 could indicate a bearish trend continuation, whereas a move above this level might suggest a bullish reversal.

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