- USD/CAD sees some buying interest as declining oil prices put pressure on the currency pair.
- The moderate weakness of the USD seems to overshadow significant gains in spot prices.
- The current technical setup warrants a closer examination.
The USD/CAD currency pair has shown some upward movement, bouncing back from the previous day’s range of 1.3680-1.3675, gaining momentum during the Asian session on Wednesday. Spot prices climbed to new daily highs near the 1.3730-1.3735 range, likely influenced by falling crude oil prices, which are affecting commodity-linked currencies.
Examining the technical indicators, this week’s decline from the 1.3800 area, which is seen as the upper limit for the month, found support near the 100 Simple Moving Average (SMA) on the 4-hour chart as of Tuesday. Recent price movements, along with breaks above a resistance line from a short-term downward trend, suggest a bullish sentiment, although caution is advised due to mixed signals from daily oscillators.
As for potential resistance, a significant barrier exists around the 1.3775 mark—coinciding with the 200-period SMA on the 4-hour chart. Beyond that, monthly highs are near the 1.3800 figure. Should the price surpass this level, the USD/CAD could approach the 1.3835-1.3840 range, possibly targeting 1.3860, which marked a peak on May 29, leading eventually to the 1.3900 level.
On the flip side, the 1.3700 level could act as immediate support, followed by the 1.3680-1.3675 range (also the 100 SMA on the 4-hour chart). A decisive move below this point could lead to a drop toward lower trendline barriers. If the price falls below 1.3600, the short-term outlook may shift in favor of bearish traders.
USD/CAD 4-hour chart
Canadian Dollar FAQ
The Canadian Dollar (CAD) is influenced primarily by interest rates, the health of the Canadian economy, inflation levels, and trade balances. Market sentiment also plays a role, as investors may shift between riskier assets or safe havens, impacting CAD positively or negatively.
The Bank of Canada (BOC) significantly impacts the CAD by setting interbank lending rates, which in turn affect broader interest rates. The BOC’s goal is to keep inflation within a target of 1-3% by adjusting interest rates. Generally, higher rates tend to strengthen the CAD, while quantitative measures can further influence credit conditions.
Oil prices are crucial for the CAD’s value since oil is Canada’s largest export. A rise in oil prices typically boosts CAD values, while a decline can hurt them, affecting trade balances positively or negatively.
Inflation has traditionally been a negative factor for currency values, but in recent years, it can lead central banks to raise interest rates, attracting global investments. This increases demand for local currencies, including CAD.
Macroeconomic indicators such as GDP, Manufacturing PMI, employment rates, and consumer sentiment can affect CAD. A strong economy usually supports the CAD by attracting investment and potentially prompting the BOC to raise interest rates, while weak data may lead to a decrease in CAD value.
