The USDCAD currency pair finds itself on shaky ground, currently on course for a third consecutive session of losses. This weakness comes despite positive US economic data, with the ISM Manufacturing PMI exceeding expectations and signalling potential upward pressure on US prices. Conversely, Canada’s S&P Manufacturing PMI remains stagnant, hinting at ongoing weakness in the sector.
However, crude oil prices continue to provide some support for the Loonie, with rising foreign currency inflows a potential tailwind. The Bank of Canada (BOC) interest rate decision looms large later today, with the market anticipating no change to the current 5.0% rate. The focus will be on the Bank’s language regarding future monetary policy, with a possibility of hints towards upcoming rate cuts. Overall, the Canadian dollar awaits direction from the BOC decision and contrasting economic data from both nations.
Technical Analysis
On the 4-hour chart, the USD/CAD pair exhibits a flat price action, currently trading around 1.35251. The recent price movement saw a break below the 20-period Simple Moving Average (SMA), with subsequent trading occurring around the 50-period SMA and 100-period SMA. The Relative Strength Index (RSI) is indicating neutrality, hovering around the 50.00 level.
Short-term trading opportunities may emerge if the price finds support at the SMAs, potentially pushing towards the resistance at 1.35905. A break above this level could confirm bullish momentum, targeting the next resistance at 1.36131. Conversely, a sustained push below the SMAs may lead to short-term trading opportunities towards the initial support at 1.35251, with further downside potential towards 1.34775.
Summary
The USDCAD pair awaits its next directional cue. The BOC decision and US inflation data later today are the key events that could dictate the currency pair’s trajectory. Technically, the price action finding temporary support at the SMAs suggests a possible pause in the recent downward move. A break above the resistance levels could signal a bullish reversal, while a confirmed break below the support could open the door for further downside.
Sources: TradingView, Trading Economics, Dow Jones Newswire, Reuters.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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