Technical Analysis

USD/CAD Price Analysis – June 25, 2024

By LonghornFX Technical Analysis
Jun 25, 20244 min

Daily Price Outlook

During the European trading session, the USD/CAD currency pair has maintained its upward rally and remained well bid around 1.3675, hitting the intra-day high of 1.368 1level. However, the bullish performance of the USD/CAD pair is driven by a combination of factors, including a stronger US dollar supported by a hawkish Fed stance and upbeat US economic data. Meanwhile, the lower WTI price limit the upside of the commodity-linked Canadian Dollar and contributed to the USD/CAD currency pair gains.

Impact of US Economic Data and Fed Policy on USD Strength and USD/CAD Pair

On the US front, the US dollar strengthened broadly after robust US PMI data and a unexpectedly hawkish Federal Reserve stance. San Francisco Fed President Mary Daly underscored the Fed's pledge to keep rates steady until inflation nears 2%. However, she also stressed backing the labor market, hinting at possible rate adjustments if unemployment climbs. This balanced approach to inflation and employment bolstered market faith in the dollar, which rallied on upbeat economic signals and the Fed's prudent yet attentive approach to interest rates.

Therefore, the USD/CAD pair surged as the US dollar gained strength on positive economic data and a hawkish Fed stance, overshadowing the Canadian dollar amid cautious sentiment and potential rate adjustments highlighted by Mary Daly.

Impact of Crude Oil Prices on USD/CAD and Market Events to Watch

Another significant factor influencing the bullish trend of the USD/CAD pair is the recent decline in crude oil prices, which directly impacts the commodity-linked Canadian dollar (CAD). Canada, a major exporter of oil to the United States, typically sees a negative correlation between oil prices and the CAD's strength. Currently, West Texas Intermediate (WTI), the benchmark for US crude oil, is trading around $81.40 per barrel. Despite this decline, crude prices could find support from anticipated strong summer driving demand and ongoing geopolitical tensions in the Middle East, which may constrain further downside.

Hence, the drop in crude oil prices has placed downward pressure on the CAD, thereby bolstering gains for the USD/CAD pair.

Looking forward, market participants will keenly watch upcoming speeches by Federal Reserve members Lisa Cook and Michelle Bowman for clues regarding future monetary policy directions. Additionally, key US economic releases scheduled for this week, such as the final Q1 GDP report on Thursday and the May PCE Price Index report on Friday, are expected to influence market sentiment and financial markets significantly.

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

USD/CAD - Technical Analysis

The USD/CAD pair is trading at $1.36491, showing a slight decline of 0.11%. On the 4-hour chart, the pivot point is marked at $1.3641, a critical level that could determine the pair’s next movement. Immediate resistance levels are identified at $1.3666, $1.3690, and $1.3717.

These levels represent potential upward targets if the price rebounds, indicating a shift in bullish momentum.

On the downside, immediate support is found at $1.3618, followed by $1.3589 and $1.3561. These levels are essential for traders to monitor as they suggest where the price might find stability if the downward trend continues.

The Relative Strength Index (RSI) is currently at 34, indicating that the pair is approaching oversold territory. This could imply a potential for a bounce-back, but traders should remain cautious of further declines.

The 50-day Exponential Moving Average (EMA) at $1.3690 acts as a significant resistance level. A break above this EMA would reinforce a bullish trend, suggesting further gains.

However, maintaining a position below the pivot point indicates a bearish outlook. The overall technical outlook for USD/CAD remains bearish below the pivot point of $1.3641.

Given the current indicators, traders might consider an entry price for selling around $1.36658, aiming for a take profit at $1.36239, with a stop loss set at $1.36908.

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