USD/CAD Price Analysis – Oct 03, 2023

Daily Price Outlook

During the early European trading session, the USD/CAD pair continued its upward momentum, marking the third consecutive day of gains. It surged to its highest level since late March, driven by several key factors. Firstly, the Canadian dollar, often referred to as the Loonie, faced increasing pressure due to the declining oil prices, which pushed the USD/CAD pair higher. Another factor boosted the currency pair is the Federal Reserve's adoption of a more hawkish stance, which underpinned the US dollar and contributed to the USD/CAD pair gains.

Strength of the US Dollar and Its Impact on USD/CAD

The US dollar has been getting stronger lately, reaching a 10-month high. This is mainly because people believe that the Federal Reserve (Fed) will continue to be strict with its monetary policy. The US is also seeing strong economic data, which supports this belief. Cleveland Fed President Loretta Mester's comments have added to this, suggesting that the Fed will keep interest rates high for a while. As a result, the yields on the 10-year US government bonds are at their highest in 16 years. Additionally, with the market feeling cautious, investors are choosing the safe US dollar, which is helping the USD/CAD pair go up.

Challenges for the Canadian Dollar (CAD)

The Canadian Dollar (CAD) is facing challenges as people believe the Bank of Canada (BoC) won't raise interest rates anymore. This belief grew stronger when Canada's economy didn't grow in July, with manufacturing seeing its biggest drop in over two years. In June, the economy even shrank by 0.2%. This suggests the BoC might keep interest rates steady despite rising prices. In the meantime, the falling oil prices for four consecutive days are undermining the CAD and contributing the USD/CAD gains.

USD/CAD - Technical Analysis

The USD/CAD pair exhibited notable strength in its previous session, successfully exceeding our initial target of 1.3585 and advancing to our secondary objective at 1.3680. The currency pair has begun today's trading with a further ascent, breaking past this level, thereby reinforcing its dominant bullish trajectory for both intraday and short-term perspectives, paving the way towards a potential target of 1.3805.

Given the current dynamics, the bullish outlook remains robust and is further endorsed by the EMA50. However, it's crucial to mention that if the pair fails to maintain its position above 1.3680, it could reverse into a bearish correction.

Today, the anticipated trading bracket for USD/CAD is delineated between a support level of 1.3640 and a resistance threshold of 1.3780.