- USD/CAD grinds higher after positing two-day winning streak.
- Bullish MACD signals, sustained trading beyond weekly support line favor buyers.
- Convergence of 100-DMA, four-month-old resistance line appears a tough nut to crack for bulls.
USD/CAD teases buyers around 1.3465-70 heading into Friday’s European session, after a two-day uptrend, as the Loonie pair traders await crucial statistics from Canada and the US. In doing so, the quote remains indecisive despite printing minor gains by the press time.
Also read: USD/CAD copies Oil’s inaction near mid-1.3400s, Canada employment, early signals for US inflation eyed
Even so, the bullish MACD signals join the pair’s successful trading above the weekly support line, around 1.3390 by the press time, to keep the buyers hopeful.
That said, the 50-DMA level surrounding 1.3500 guards the USD/CAD pair’s immediate upside before the convergence of the 100-DMA and descending resistance line from early October, close to 1.3540 at the latest.
In a case where the Loonie pair manages to stay beyond 1.3540, the previous monthly high of 1.3685 and the December 2022 peak surrounding 1.3705 will act as the last defense of the USD/CAD bears.
On the flip side, a clear break of the weekly support line, near 1.3390, will aim for the weekly low of 1.3360 before highlighting the monthly bottom surrounding 1.3260.
Should the USD/CAD prices remain weak past 1.3260, November 2022 low and the last July’s peak, respectively around 1.3235 and 1.3220, will gain the market’s attention.
USD/CAD: Daily chart
Trend: Further upside expected
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The USD/CAD pair has started off the week with a positive bias, benefitting from positive vibes originating from the equity market rally which is being driven by an easing of US-China trade tensions. But, according to analysts, USD/CAD bulls may have to brace for a bumpy road to the north as Canadian and US economic data is set to be released in the upcoming days.
Analysts at Scotiabank point out that the focus over the near-term will be on upcoming releases of key economic data, namely housing starts and building permits in the US and Canada and consumer price inflation figures, which are expected to provide some direction for the USD/CAD pair.
Upcoming economic data releases, including US and Canada consumer price figures and economic growth, are expected to be largely positive, which could help to underpin the broadly stronger USD/CAD pair. However, analysts warned that any further tightening of US-China trade tensions could put a dampener on the recent uptick in demand for riskier assets and could put the USD/CAD pair under some pressure.
Furthermore, analysts from National Bank of Canada point out that the recent strength of the US dollar against its Canadian counterpart is the main driver of the current bearish trend for the USD/CAD pair. They note that the currency pair declined sharply over the last few weeks amid broad US dollar strength, so any further gains in the US dollar against the Canadian dollar could lead to another sharp bout of weakness, they warned.
Overall, while USD/CAD bulls may be cheered on by the strong underlying drivers of the USD/CAD pairing and the prospects of more positive US and Canadian economic data, they would be wise to brace for a potentially bumpy road to the north over the near-term as further US-China trade developments may end up throwing a spanner in the works.