The USDCAD currency pair has experienced dynamic movements in response to recent economic data releases and shifting market sentiment. Last week, the pair surged following hotter-than-expected U.S. inflation figures, only to reverse course swiftly on the heels of weaker U.S. retail sales data.
Despite the Canadian Dollar’s strength against the Greenback last week, the USDCAD pair has demonstrated resilience, posting seven consecutive weeks of gains. This trend underscores the prevailing market favouritism towards the U.S. Dollar, fuelled by declining expectations of a rate cut by the Federal Reserve amidst robust economic data.
Of particular note is the U.S. inflation rate for January, which exceeded expectations at 3.1%, contributing to market reactions. As anticipation builds around the Federal Reserve’s next moves, market attention shifts to upcoming events, including the Canadian inflation report and the release of FOMC Minutes, both poised to provide further insights into the trajectory of the USDCAD pair.
Technical
The USDCAD pair has shown resilience, posting back-to-back days of gains after a positive Monday close. The pair is currently trading in an uptrend above the 100-day moving average.
The pair found support at the 1.34127 level, driven by buoyant U.S. inflation data. However, at the 1.35863 level, overbought RSI conditions emerged, limiting further upside momentum and establishing it as a notable resistance level following a downturn. Now approaching the 61.80% Fibonacci Retracement Golden Ratio, market participants closely watch for potential price reactions.
Should the 61.80% level hold as intermediate support, attention may shift back to the 1.35863 level as a potential point of interest, contingent upon continued bullish momentum. Conversely, a breakdown below the 61.80% Golden Ratio, especially on high volume, could signal increased selling pressure, potentially leading to a retest of the 1.34127 support level.
Summary
Despite recent resilience, the USDCAD pair faces pivotal levels as it nears the 61.80% Fibonacci Retracement Golden Ratio. Continued bullish momentum may propel it towards the 1.35863 resistance level, while a breakdown below the golden ratio could lead to a retest of the 1.34127 support level.
Sources: CME, U.S. Bureau of Labor Statistics, Reuters, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
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