Technical Analysis

USD/CAD Price Analysis – Nov 07, 2023

By LonghornFX Technical Analysis
Nov 7, 20234 min

Daily Price Outlook

During the European trading session, the USD/CAD pair continued its upward movement and surged above the 1.3700 mark. However the reason for its upward rally can be attributed to the several factors, including weakening of crude oil prices, which negatively impacted the Canadian dollar (also known as the Loonie) and provided strength to the USD/CAD pair. Meanwhile, this upward trend marked the second consecutive day of gains for the USD/CAD pair, with the ongoing recovery of the US dollar serving as a significant driving force.

In contrast to this, the prospect of the Federal Reserve refraining from further interest rate hikes could potentially hinder the US dollar's ability to gain more strength against other currencies, including the Canadian dollar. Hence, this belief may act as a limiting factor for further upward movement in the USD/CAD pair in the near future.

Impact of Weak Crude Oil Prices and USD Resurgence on USD/CAD Pair

It's noteworthy to mention that Crude Oil prices have dipped to a two-month low, recorded last Friday, owing to the uncertain economic climate, potentially decreasing the demand for fuel. This circumstance has impacted the Canadian dollar due to its close ties to commodity prices. Furthermore, the US Dollar is staging a comeback after hitting its lowest point since September 20 just the day before. These two factors, the weakened Crude Oil prices and the resurgence of the US Dollar, are significantly bolstering the USD/CAD currency pair.

US Jobs Report and Fed Uncertainty Impacting USD/CAD

In the meantime, the recent disappointing US jobs report implies that the Federal Reserve (Fed) is likely to maintain its current stance for the third consecutive meeting in December. Nevertheless, remarks from Fed officials made overnight have injected uncertainty regarding the central bank's future policy decisions, contributing to some additional short-term buying of the US Dollar (USD).

However, there is a general investor sentiment that the Fed is unlikely to implement any more rate hikes. This sentiment is reinforced by the recent decline in US Treasury bond yields, which could potentially constrain additional advances for both the USD and the USD/CAD pair. Traders may be awaiting speeches from influential FOMC members, including Fed Chair Jerome Powell, to gain a clearer understanding of the future trajectory of interest rate adjustments.

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

USD/CAD - Technical Analysis

The USD/CAD pair has seen a slight uptick in the forex market, with a 0.15% increase over the past 24 hours, currently standing at 1.37209. In the 4-hour chart, the currency pair finds itself in a delicate equilibrium, with technical indicators providing a nuanced picture for traders.

At the forefront of this technical analysis is the pair's pivot point at 1.3736, which serves as a fulcrum for the day's price action. The loonie faces immediate resistance at 1.3818, with subsequent barriers at 1.3983 and 1.4065 that could cap upward movements. On the flip side, supports are layered at 1.3572, 1.3490, and further down at 1.3328, providing multiple levels for potential retracements.

The Relative Strength Index (RSI) sits at 46, slightly skewed towards bearish territory but not yet signaling oversold conditions that would typically precipitate a rebound. The MACD indicator's current reading shows a nascent bullish crossover, albeit with modest momentum, as the MACD line tiptoes above the signal line.

The 50-day Exponential Moving Average (EMA) at 1.3754 currently resides above the pair's price, suggesting short-term bearish pressure. However, this indicator is closely aligned with the current price, indicating that the sentiment could easily flip should the pair push higher.

Chart patterns do not present a clear directional bias at the moment, with candlestick formations suggesting a period of consolidation. No definitive chart pattern emerges from the current setup, indicating that traders may be awaiting further cues before committing to a direction.

In summary, the technical outlook for USD/CAD on November 7 is cautiously bearish below the 1.3750 mark, with a close above this level potentially altering the near-term sentiment to bullish.

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