USD/CAD Price Analysis – July 16, 2024

Daily Price Outlook

During the European trading session, the USD/CAD currency pair maintained its upward trend, holding strong around the 1.3685 level and reaching an intraday high of 1.3695.

The rally can be attributed to a bullish US dollar, bolstered by recent developments including an unsuccessful attempt on Donald Trump's life, which has bolstered his prospects for the 2024 presidential election, raising expectations of reduced regulations under his potential leadership.

Additionally, declining oil prices have weighed on the commodity-linked Canadian Dollar (CAD), further contributing to gains in the USD/CAD pair.

Impact of WTI Oil Price Decline and Chinese Economic Slowdown on USD/CAD Pair

On the other hand, West Texas Intermediate (WTI) oil prices have been declining for three consecutive sessions, currently trading around $80.30 per barrel. This drop is linked to a slowdown in the Chinese economy, reducing demand from the world's largest oil importer.

China's GDP grew 4.7% year-over-year in the second quarter, down from 5.3% in the first quarter and below expectations of 5.1%. The National Bureau of Statistics (NBS) noted stable economic operation in the first half of the year with a 5.0% growth rate.

Traders are now focused on Canada's upcoming Consumer Price Index (CPI) inflation data, crucial for the Bank of Canada's (BoC) decision on potential further rate cuts post a recent quarter-point reduction in June.

Therefore, the decline in WTI oil prices, driven by China's economic slowdown, may strengthen the USD/CAD pair due to reduced demand for the Canadian Dollar and expectations around the Bank of Canada's policy response to inflation data.

Impact of US Dollar Strength and Fed's Policy on USD/CAD Pair

On the US front, the US dollar gained strength due to recent events, including an unsuccessful attempt on Donald Trump's life, boosting his prospects for the 2024 presidential election and sparking hopes of reduced regulations under his potential leadership.

Additionally, expectations of higher government debt and inflation under Trump's policies further bolstered the dollar. This bullish sentiment strengthened the US dollar against the Australian dollar (AUD/USD), driving the pair lower amid increased risk aversion and dollar demand.

Meanwhile, Federal Reserve Chair Jerome Powell's dovish comments on inflation, indicating confidence in reaching the Fed's target sustainably, raised expectations of potential interest rate cuts, which initially capped gains in the US dollar against the CAD.

Meanwhile, Fed Bank of San Francisco President Mary Daly noted a cooling inflation trend, suggesting the Fed is on track toward its 2% target and emphasizing the need for more data before deciding on interest rates. Market sentiment now indicates an 85.7% probability of a 25-basis point rate cut in September, up from 71.0% last week.

Therefore, the US dollar's strength, fueled by events boosting Trump's election prospects and expectations of higher debt and inflation, likely strengthens against the Canadian dollar (USD/CAD) amid increased risk aversion and anticipations of Fed interest rate cuts.

USD/CAD - Technical Analysis

The USD/CAD pair is currently trading at $1.36888, showing negligible movement from the previous session. The 4-hour chart delineates significant price levels, with the pivot point situated at $1.3692. Immediate resistance is noted at $1.3720, followed by $1.3756 and $1.3782. On the downside, immediate support lies at $1.3672, with further support levels at $1.3653 and $1.3629.

The Relative Strength Index (RSI) is positioned at 65, indicating the pair is approaching overbought conditions.

This suggests potential caution for traders as the pair nears resistance levels. The 50-day Exponential Moving Average (EMA) is recorded at $1.3634, which acts as a critical support level, indicating the overall bullish trend remains intact if the price stays above this mark.

The recent stability in the USD/CAD can be attributed to mixed economic signals from both the U.S. and Canada. While the U.S. economy shows robust performance, bolstered by positive economic indicators and speculation about future rate hikes, the Canadian dollar is supported by strong commodity prices, particularly oil, which is a significant export for Canada.

Traders considering positions in the USD/CAD pair should look to buy above $1.36783, with a take-profit target at $1.37133 and a stop-loss set at $1.36591. This strategy leverages the current bullish sentiment while protecting against potential downside risks.

Related News

AUD/USD Price Analysis – July 16, 2024

GOLD Price Analysis – July 16, 2024

USD/CAD Price Analysis – July 09, 2024