USD/CAD Price Analysis – July 23, 2024

Daily Price Outlook

Despite a bearish US dollar and dovish Federal Reserve (Fed) expectations, the USD/CAD currency pair has continued its upward trend, trading around the 1.3763 level and reaching an intra-day high of 1.3773.

This upward movement is largely attributed to the recent slump in crude oil prices, which weakens the commodity-linked Canadian dollar and supports the USD/CAD pair. Conversely, selling pressure on the US dollar, driven by expectations of a possible Fed interest rate cut in September, has capped further gains in the USD/CAD pair.

Effects of Anticipated Fed Rate Cuts and Lower Treasury Yields on the USD/CAD Pair

On the US front, the broad-based US dollar has weakened recently due to expectations that the Federal Reserve will soon cut interest rates. Investors believe the Fed may start reducing rates in September, with possible additional cuts later in the year.

This has led to lower US Treasury bond yields, making bonds less attractive and putting pressure on the dollar.

The weaker US dollar, driven by anticipated Fed rate cuts and lower Treasury yields, has supported the USD/CAD pair, pushing it higher as the Canadian dollar weakens from falling oil prices.

Impact of Falling Crude Oil Prices on the USD/CAD Pair

On the other side, the recent drop in crude oil prices to a one-month low has weakened the Canadian dollar, benefiting the USD/CAD pair.

Oil prices were flat on Tuesday after a European Central Bank official suggested a possible rate cut in September, which offset some pressure from renewed hopes for a ceasefire in the Gaza conflict.

Therefore, the decline in oil prices over the previous sessions has further supported the USD/CAD pair by reducing the strength of the commodity-linked Loonie.

USD/CAD - Technical Analysis

The USD/CAD pair is trading at $1.37696, up 0.06% for the day. The 4-hour chart suggests a bullish trend, with the pivot point set at $1.3791. This level is crucial for determining the market's direction. If the price surpasses this pivot point, the bullish trend is likely to continue.

Immediate resistance is observed at $1.3791, followed by $1.3822 and $1.3851. These levels act as potential barriers to any upward movement. On the downside, immediate support is seen at $1.3713, with further support at $1.3674 and $1.3631, which could provide potential entry points for long positions if the price rebounds.

The Relative Strength Index (RSI) is at 74, indicating that USD/CAD is in overbought territory. This suggests that a correction could be imminent, although the overall trend remains bullish. The 50-day Exponential Moving Average (EMA) is at $1.3699, which supports the bullish outlook as long as the price remains above this level.

Given the technical indicators, the suggested trading strategy is to buy above $1.37556, with a take profit target at $1.37910 and a stop loss at $1.37275. This strategy aligns with the current bullish sentiment and key resistance and support levels.

In conclusion, USD/CAD's outlook remains bullish above the pivot point of $1.3791.

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