- USD/CAD is exhibiting a downward tendency within its weekly trading range, influenced by a weakening US Dollar and increasing Oil prices.
- The mixed technical landscape suggests a cautious approach is warranted before making any aggressive directional investment decisions.
- A definitive break above the 1.4000 confluence zone would likely signal a renewed bullish trend.
The USD/CAD currency pair is experiencing selling pressure for the second consecutive day on Friday, although it remains constrained within the trading range established at the start of this week. The pair is currently trading just below the 1.3950 level, reflecting a decrease of over 0.10% for the session, driven by a combination of adverse factors.
The weaker-than-expected US macroeconomic data released on Thursday has reinforced market expectations for further interest rate reductions by the Federal Reserve (Fed), thereby placing the US Dollar (USD) bulls in a defensive posture. Recent economic indicators, such as inflation figures and employment data, have fallen short of projections, leading investors to anticipate a more dovish monetary policy stance from the Fed. Furthermore, a modest increase in Crude Oil prices is providing support to the commodity-linked Canadian Dollar (Loonie), adding to the downward pressure on the USD/CAD exchange rate. The rise in oil prices is attributed to ongoing geopolitical tensions and supply concerns.
The current range-bound price action could be interpreted as a bullish consolidation phase, particularly in light of the recent rebound from the year-to-date low. However, the failure to decisively breach the 1.4000 confluence area this week – which includes the 200-day Simple Moving Average (SMA) and the 38.2% Fibonacci retracement level of the decline observed between March and May – necessitates a degree of caution. This technical resistance suggests that the upward momentum may be limited in the short term. Market participants are closely monitoring these technical levels for potential breakout or breakdown signals that could dictate the next directional move for the USD/CAD pair. Further influencing the pair will be upcoming Canadian and US economic data releases, including GDP figures and employment reports, which will provide greater clarity on the economic outlook and potential monetary policy adjustments.
