Technical Analysis

USD/CAD Price Analysis – March 26, 2024

By LonghornFX Technical Analysis
Mar 26, 20244 min

Daily Price Outlook

The USD/CAD currency pair experienced a decline and still showing bearish bias around 1.3590 level. This downward performance can be attributed to several factors influencing both the US Dollar and the Canadian Dollar. However, the lower US Treasury yields put pressure on the US dollar, which was seen as a key factor that kept the USDCAD pair under pressure. Market sentiment indicates expectations of the Federal Reserve (Fed) commencing an easing cycle, starting in June. This anticipation of monetary policy adjustments weighs on the Greenback's strength, impacting its performance against the Canadian Dollar.

Furthermore, the CAD faced downward pressure following indications from the Bank of Canada (BoC) regarding possible rate cuts in 2024. The BoC's latest meeting minutes revealed discussions around quantitative tightening and the sustainability of incremental interest rate decreases. This stance adds to the bearish sentiment surrounding the CAD, contributing to the USD/CAD pair's downward trajectory.

Apart from this, fluctuations in Crude oil prices play a crucial role in influencing the performance of the Canadian Dollar. As one of Canada's major exports, changes in oil prices directly impact the country's economy and currency. The recent decline in oil prices added pressure on the CAD, helping USD/CAD pair's to limit its losses.

Fed Projected Three Rate Cuts in 2024 Undermine the USD and Impact on USD/CAD

On the US front, Federal Reserve's projected three rate cuts in 2024, which undermine the USD's strength, consequently impacting the USD/CAD currency pair. However, the ongoing speculations surrounding the Fed's monetary policy decisions have contributed to market uncertainty and downward pressure on the dollar.

Atlanta Fed President Raphael Bostic's anticipation of only one rate cut contrasts with Chicago Fed President Austan Goolsbee's forecast of three cuts. This divergence in views reflects the uncertainty surrounding the timing and magnitude of potential rate adjustments. However, both perspectives emphasize the potential disruption and impact on market sentiment if rates are reduced prematurely.

Therefore, the anticipation of a more accommodative monetary policy stance from the Fed weakens the USD against other major currencies, including the CAD.

Bank of Canada's Possible Rate Cuts in 2024 Exert Downward Pressure on CAD and USD/CAD Pair

On the Canadian front, the Bank of Canada's indication of possible rate cuts in 2024, as revealed in its latest meeting minutes, has exerted downward pressure on the CAD and influenced the USD/CAD currency pair. Deputy Governor Toni Gravelle reaffirmed the bank's plan to gradually reduce the money supply, ensuring that interest rates decrease in a sustainable manner.

Investors closely monitor central bank meetings and announcements for insights into future monetary policy decisions. The BoC's discussion of potential rate cuts signals a dovish stance, impacting market sentiment and investor confidence in the CAD. As expectations of lower interest rates in Canada increase, the CAD weakens against other currencies, including the USD. This contributes to the downward trajectory of the USD/CAD pair as traders adjust their positions in response to shifting monetary policy expectations.

Decline in Crude Oil Prices Adds Pressure to CAD and USD/CAD Pair

On the other hand, the recent decline in Crude oil prices has added pressure to the CAD and reinforced the downward trend of the USD/CAD currency pair. Oil prices are a significant driver of the Canadian economy, given Canada's status as a major oil exporter. The drop in oil prices negatively impacts Canada's export revenues and economic outlook, leading to a depreciation of the CAD.

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

USD/CAD - Technical Analysis

The USD/CAD pair experienced a slight uptick in today’s market, registering a 0.01% increase to stand at 1.3586. This movement, albeit minimal, indicates a nuanced market environment where traders are gauging several factors before making significant commitments.

A closer inspection reveals that the pair is trading near a pivot point of 1.3615, suggesting a potential pivot in market direction. Resistance levels are delineated at 1.3615, 1.3661, and 1.3711, pointing towards key barriers that could cap upward movements. Conversely, the support framework is established at 1.3540, with further layers at 1.3506 and 1.3459, providing cushions that could arrest downward trends. The Relative Strength Index (RSI) sits at 56, indicating a slight lean towards a bullish sentiment but still far from the overbought threshold. Additionally, the 50-Day Exponential Moving Average (EMA) at 1.3549 reinforces the pair's underlying bullish inclination by positioning just below current price levels.

Based on this analysis, a strategic approach suggests setting a buy limit at 1.35733, with an aim to take profits at 1.36154, and a stop loss positioned at 1.35386.

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