USD/CAD Price Analysis – Oct 29, 2024

Daily Price Outlook

During the European trading session, the USD/CAD currency pair continued its upward trend, stabilizing near the 1.3890 level. However, the Canadian Dollar (CAD), heavily influenced by commodity prices, is under pressure from declining oil prices, which pushed the USD/CAD pair down. Meanwhile, the US Dollar gains strength, bolstered by rising US bond yields.

This uptick in yields is fueled by growing market sentiment favoring Former President Donald Trump in the upcoming US presidential election, along with expectations that the Federal Reserve may take a more cautious approach regarding future interest rate cuts.

Looking ahead, investors are exercising caution in anticipation of key US economic reports this week, including the Advance Q3 GDP, the Personal Consumption Expenditures (PCE) Price Index, and the Nonfarm Payrolls (NFP) report.

Impact of Oil Prices and Interest Rate Cuts on the USD/CAD Pair

West Texas Intermediate (WTI) oil is currently priced around $67.50 per barrel, showing a recent drop. This decrease is mainly because fears of a larger conflict in the Middle East have eased, as military actions have been limited.

However, tensions are still high, with Iran's Foreign Ministry spokesperson suggesting that Iran may respond to Israel's recent attacks on its military targets, mentioning the use of "all available tools," according to Reuters. These geopolitical issues continue to affect oil prices and, in turn, the value of the Canadian Dollar (CAD), which relies heavily on oil.

On the economic front, Bank of Canada (BoC) Governor Tiff Macklem recently talked about the decision to cut interest rates last week. He explained that these cuts are a response to the previous high rate hikes meant to control inflation.

Macklem also emphasized the need to find a "neutral rate," which is a level that doesn't either boost or slow down the economy. His comments suggest that the central bank is carefully watching economic conditions to balance supporting growth while keeping inflation in check.

Therefore, the decline in WTI oil prices may weaken the Canadian Dollar (CAD), potentially leading to upward pressure on the USD/CAD pair. Furthermore, the Bank of Canada's rate cuts could further support the US Dollar's strength against the CAD.

USD/CAD – Technical Analysis

The USD/CAD pair is trading at $1.38970, showing a slight uptick of 0.09% for the day. With immediate price action hovering around the $1.38851 mark, USD/CAD exhibits a bullish sentiment but faces key resistance levels ahead.

The pivot point at $1.39090 stands as an important threshold, with immediate resistance seen at $1.39325, followed by $1.39567, which could attract further buying interest if breached.

On the support side, the first level is positioned at $1.38669, close to the 50-day Exponential Moving Average (EMA) of $1.38612, which serves as a critical support line for this trend.

Further downside support sits at $1.38407 and $1.38133. A dip below $1.38407 could suggest a shift in the bullish momentum, potentially leading to further declines.

The Relative Strength Index (RSI) is reading at 62, indicating a mildly bullish stance but still short of overbought territory, which provides room for potential upward movement.

With the EMA supporting the current trend and RSI maintaining healthy levels, USD/CAD appears well-positioned for continued gains if it manages to break above the $1.39090 pivot.

Traders seeking an entry position may consider buying above $1.38852, with a take-profit target near $1.39299 and a conservative stop-loss at $1.38609 to hedge against sudden downside moves.

In summary, the USD/CAD outlook remains cautiously bullish, contingent upon a sustained move above $1.39090 to signal potential for further gains. Key resistance and support levels will guide the near-term direction as market participants weigh potential movements.

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