This year, the USDCAD currency pair has experienced a notable uptrend, marking five consecutive weeks of gains and currently boasting a year-to-date increase of 1.56%.
This surge is primarily attributed to the strength of the U.S. Dollar, fuelled by expectations of prolonged high interest rates. The probability of the initially anticipated rate cuts in March has dwindled to a mere 17.5%, down from 60.8% a month ago, largely due to robust economic data, notably the Nonfarm Payrolls report exceeding expectations at 353,000 jobs added.
The labour market’s resilience has led to speculation that the Federal Reserve may opt to maintain elevated interest rates to temper labour market growth and inflationary pressures. As market attention turns to the Canadian employment report, traders eagerly anticipate further insights into the currency pair’s trajectory amidst evolving economic conditions and central bank policies on both sides of the border.
Technical
The USDCAD currency pair has recently exhibited intriguing price dynamics, hinting at a potential shift in momentum. Following a dip in the pair’s price action, support emerged at the 1.33658 level after a swift upsurge occurred.
After surpassing the 100-day moving average, the pair encountered significant resistance at the 1.35356 level, forming a triple-top pattern – a notable bearish signal in technical analysis. Having been tested two times before, this resistance level presents a formidable barrier for bullish traders.
Furthermore, the emergence of overbought conditions at the resistance level, as indicated by the RSI, underscores the selling pressure and subsequent retracement observed in the pair’s price action. Currently, the 50% Fibonacci Retracement level has emerged as a crucial area of interest, serving as a potential support level. Should buying activity prevail, a retest of the 1.35356 resistance level could be in sight. However, a breakdown below the 50% level, especially accompanied by high volume, could signal a shift in market sentiment favouring the bears. In such a scenario, attention may turn to the 61.80% Golden Ratio as a potential downside target.
Summary
With the USDCAD’s recent uptrend fuelled by the robust U.S. Dollar, attention turns to key technical levels. Resistance at 1.35356 poses a challenge amid overbought conditions, while the 50% Fibonacci Retracement level offers potential support. Market sentiment hinges on evolving economic data and central bank policies.
Sources: CME, Reuters, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
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