USD/CAD Price Analysis – Nov 12, 2024
Daily Price Outlook
During the European session on Tuesday, the USD/CAD currency pair continued its upward trend for the third day, trading near 1.3950 level. However, the US dollar strengthened further after the confirmation of Donald Trump’s victory in the US election.
Analysts believe that Trump’s potential fiscal policies, which may boost investment, spending, and labor demand, could increase inflation risks. This might prompt the Federal Reserve (Fed) to take a more hawkish approach, raising interest rates to control inflation.
As a result, the expectations of a tighter US monetary policy are likely to support the US dollar, benefiting the USD/CAD pair. With this ongoing trend, traders are keeping a close eye on potential developments that could further impact the USD and the currency pair’s movement in the near future.
Impact of Falling Crude Oil Prices on the USD/CAD Pair
On the CAD front, the Canadian Dollar (CAD) is under pressure due to falling crude oil prices. This is because Canada is the largest oil exporter to the United States, so when oil prices drop, it negatively impacts the CAD. As of now, West Texas Intermediate (WTI) oil is trading around $67.90. Lower oil prices tend to weaken the Canadian Dollar because the country relies heavily on oil exports.
Crude oil prices are continuing to decline due to concerns about a potential trade war under a Trump administration, which could lead to tariffs and disrupt global trade. Additionally, there are worries about slower demand growth in China, a major consumer of oil.
These factors have caused oil prices to fall further, putting additional downward pressure on the CAD. Traders and analysts are watching closely to see how these developments might affect oil prices and, in turn, the value of the Canadian Dollar.
The falling crude oil prices put downward pressure on the Canadian Dollar, which may weaken the CAD against the US Dollar. As a result, the USD/CAD pair could continue to rise, benefiting from a stronger USD and a weaker CAD.
Impact of US Economic Outlook and Fed Policy on the USD/CAD Pair
On the US front, the broad-based US Dollar (USD) continues to strengthen after the confirmation of Donald Trump’s victory in the US election. Analysts believe that Trump’s potential fiscal policies could boost investment, spending, and labor demand, which might increase inflation risks.
This could prompt the Federal Reserve (Fed) to adopt a more hawkish approach, raising interest rates to control inflation. As a result, the USD and the USD/CAD pair may see further support.
On Sunday, Minneapolis Fed President Neel Kashkari said the US economy is showing strength as the Fed works to lower inflation. However, he mentioned that the Fed isn’t done yet and needs more proof before considering another rate cut.
The Fed’s goal is to bring inflation down to 2%, and until that happens, they’re unlikely to lower rates further. This cautious approach helps support the strength of the US Dollar.
Therefore, the US Dollar’s strength, fueled by potential fiscal policies and the Federal Reserve's hawkish stance, supports the USD/CAD pair. As inflation risks rise, the Fed may raise interest rates, further boosting the USD and likely pushing the USD/CAD pair higher.
USD/CAD – Technical Analysis
The USD/CAD pair is trading at $1.39476, up 0.16%, and currently maintains a bullish stance above its pivot point of $1.39420. This level serves as a critical support, indicating potential for further gains.
.Immediate resistance is situated at $1.39590, with additional levels at $1.39740 and $1.39892. Breaking through these levels could reinforce the bullish outlook, particularly as the U.S. dollar finds strength amid resilient economic indicators and higher Treasury yields.
On the downside, support emerges at $1.39322, followed by $1.39174 and $1.38974. A breach below these support levels could trigger a short-term correction, undermining the bullish sentiment.
The Relative Strength Index (RSI) is currently at 65, indicating that while USD/CAD is nearing overbought conditions, there may still be room for further appreciation. However, an RSI close to overbought territory signals that buyers should proceed with some caution as momentum could slow.
The 50-day Exponential Moving Average (EMA) sits at $1.39187, lending further support to the upward trend as long as prices remain above this average.
Given these technical indicators, USD/CAD's outlook remains moderately bullish in the near term. A buy entry above $1.39419 is recommended, with a take-profit target of $1.39703 and a stop-loss at $1.39241 for effective risk management.
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