Technical Analysis

USD/CAD Price Analysis – Oct 17, 2023

By LonghornFX Technical Analysis
Oct 17, 20233 min

Daily Price Outlook

Despite the lower-than-expected Canadian CPI, the USD/CAD pair failed to sustain its upward momentum, showing a bearish performance due to a weakening US dollar. The dollar was under pressure due to the dovish stance of the Federal Reserve. However, the dollar's losses may be short-lived, as overall market sentiment leans towards risk aversion, primarily due to escalating tensions in the Middle East. This sentiment could limit the US dollar's losses and, in turn, help the USD/CAD pair avoid deeper declines.

Investors are anticipating the release of Canada's inflation data and the United States' Retail Sales data for September. These upcoming data releases are likely to impact the trading dynamics within the USD/CAD pair.

Market Dynamics and Geopolitical Factors

During the European session, the S&P 500 futures recorded losses, signifying a decrease in risk appetite among market participants. The upward pressure on safe-haven assets is a result of mounting tensions in the Middle East. However, this tension is exacerbated by Israel's preparations for a ground offensive in Gaza against Hamas. Notably, the visit of US President Joe Biden to Israel takes center stage, with the primary objective being the safe evacuation of civilians amid the ongoing military actions by Palestinian groups.

The US Dollar Index (DXY) hovers around 106.60 as investors anticipate the Federal Reserve (Fed) will maintain interest rates on November 1. This expectation stems from Fed policymakers advocating for steady rates at 5.25-5.50%, given the persistence of multi-year high long-term bond yields, which are expected to constrain spending and investments.

Focus on Canadian Dollar: Inflation Data for September

Looking forward, investors are keeping a close eye on the coming inflation data for September. The headline Consumer Price Index (CPI) is expected to increase by 0.1% on a monthly basis, a drop from the previous 0.4% rise. The annual headline CPI, however, is anticipated to maintain a steady growth rate of 4%. Additionally, the core CPI figures are expected to show a consistent expansion, with a 0.1% increase monthly and a 3.3% increase on an annual basis.

Therefore, the lower-than-expected Canadian CPI may weaken the Canadian Dollar (CAD), potentially strengthening the USD/CAD pair as investors seek the stronger US dollar.

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

USD/CAD - Technical Analysis

The USD/CAD currency pair, as of October 17, has been recorded at 1.3631, marking an appreciation of 0.15%. This assessment, based on a 2-hour chart timeframe, reveals distinct price benchmarks that can guide traders. A pivot point for the pair is found at 1.3637.

On the upside, potential resistances are outlined at 1.3695, followed by more substantial barriers at 1.3745 and 1.3785. In contrast, the downside reveals immediate support at 1.3607, with successive support zones at 1.3581 and 1.3545.

Delving into technical indicators, the Relative Strength Index (RSI) has posted a value of 48. This slightly sub-midpoint value suggests a mild bearish sentiment, as RSI values below 50 tend to be indicative of bearish sentiment.

From the perspective of moving averages, the 50-Day Exponential Moving Average (EMA) is situated precisely at the pivot point of 1.3637. This means that the pair is hovering around this average, indicating a potential tipping point between short-term bullish and bearish trends.

No particular chart pattern has been highlighted for the session. However, its implications are paramount in deducing price movement tendencies.

In summation, the overarching trend for the USD/CAD pair seems to lean bearish if it goes below 1.3637, with the possibility of turning bullish if it crosses above. Given the existing market sentiment and technical configurations, traders should be on the lookout for possible challenges or confirmations of these levels in upcoming sessions.

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