Technical Analysis

USD/CAD Price Analysis – Oct 31, 2023

By LonghornFX Technical Analysis
Oct 31, 20234 min

Daily Price Outlook

The USD/CAD currency pair had difficulty sustaining its upward momentum, as it attracted new sellers following an intraday increase to the mid-1.3800s. Subsequently, it dipped to a fresh daily low in the first half of the European session. Nonetheless, the prices managed to remain above the psychological level of 1.3800 and seem poised to continue the three-week-long uptrend.

However, the bearish sentiment can be attributed to the slight uptick in Crude Oil prices, which is bolstering the commodity-linked Canadian Dollar (Loonie). Additionally, the generally positive mood in the equity markets is driving the safe-haven US Dollar to a one-week low. Consequently, this is exerting downward pressure on the USD/CAD pair.

Federal Reserve Expected to Maintain Interest Rates Amid Strong US Economy

It's important to note that the Federal Reserve (Fed) is expected to announce its decision on Wednesday. They are likely to maintain the benchmark interest rate within the range of 5.25% to 5.50%, which is the highest it has reached in 22 years. This is due to the continued strength of the US economy and relatively persistent inflation. As a result, the Fed may keep the door open for one more rate increase in 2023. This more hawkish stance is anticipated to keep US Treasury bond yields elevated, consequently lending support to the US dollar and the USD/CAD currency pair.

Factors Influencing Crude Oil and USD/CAD Pair

Moreover, investors are worried about China's weakening economy, as it's the largest oil importer globally. This, coupled with concerns that the rising borrowing costs could reduce the demand for fuel, is preventing significant increases in Crude Oil prices. Additionally, last week, the Bank of Canada's Governor, Tiff Macklem, gave a signal that interest rates might not go up any further, which should help prevent significant drops in the USD/CAD pair.

As we look ahead, investors will be closely monitoring key US economic updates, specifically, the Chicago PMI and the Conference Board's Consumer Confidence Index during the early North American session. Furthermore, the demand for the US dollar, which is influenced by bond yields and oil prices, is expected to exert an influence on the USD/CAD pair.

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

USD/CAD - Technical Analysis

The USD/CAD currency pair, as recorded on October 31, is exhibiting a hint of bullish sentiment. Currently trading at 1.38514, the pair has ascended by a modest 0.18% within the last 24 hours. On the technical front, the pivot point for this pair is delineated at $1.3805. Should the pair maintain its current bullish trajectory, traders should eye an immediate resistance at $1.3950, followed by subsequent resistances at $1.4024 and the more formidable $1.4168. However, if the pair retraces its steps, we might see it seek refuge at the immediate support of $1.3731, with additional cushions lying at $1.3583 and $1.3512.

The Relative Strength Index (RSI), a key barometer of momentum, is positioned at 60, indicating a bullish sentiment. This is further underscored by the Moving Average Convergence Divergence (MACD), wherein the MACD line marginally treads above its signal line, hinting at a potential upward momentum. Furthermore, the 50-Day Exponential Moving Average (EMA) stands at $1.3776, which, being below the current trading price, advocates a short-term bullish outlook.

An upward channel has been identified on the chart, serving as a harbinger for potential bullish momentum. Such patterns generally indicate that buyers have more control and that the asset is likely to continue its upward trajectory, at least in the short term.

To sum up this technical dissection, the USD/CAD is demonstrating bullish tendencies, particularly when trading above the pivotal $1.3800 mark. Given its current stance amidst the intricate web of resistance and support points, as well as the prevailing upward channel, it would not be audacious to forecast that the USD/CAD might soon aim to challenge the immediate resistance set at $1.3950.

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