- USD/CAD is struggling to surpass 1.3650, however, the upside looks favored amid strength in the USD Index.
- The Canadian Dollar witnessed immense heat on Tuesday after releasing weak GDP (Q4) figures.
- The RSI (14) has shifted into the bullish range of 60.00-80.00 after a long period of more than four months.
The USD/CAD pair has delivered a minor corrective move after failing to continue its upside momentum above 1.3650 in the early Asian session. The Loonie asset is expected to recover the corrective move as the US Dollar is extremely solid amid rising bets for more rates by the Federal Reserve (Fed) as inflation in the United States economy is getting more stubborn.
The Canadian Dollar witnessed immense heat on Tuesday after releasing weak Gross Domestic Product (GDP) (Q4) numbers. The annualized GDP remained flat lower than the expectations of 1.5% and the former release of 2.3%. While the monthly GDP (Dec) contracted by 0.1% vs. a flat consensus.
The US Dollar Index (DXY) is aiming to cross the immediate resistance of 104.60 as the risk-aversion theme has been strengthened amid hawkish Fed bets and geopolitical tensions. S&P500 was offered on Tuesday as investors see recession amid deepening rate hike discussions among Fed policymakers.
USD/CAD is meaningfully strengthened after delivering a breakout of the downward-sloping trendline plotted from October 13 high at 1.3978 on a daily scale. The 10-period Exponential Moving Average (EMA) at 1.3558 is providing cushion to the US Dollar bulls.
Meanwhile, the Relative Strength Index (RSI) (14) has shifted into the bullish range of 60.00-80.00 after a long period of more than four months. More upside looks favored as the momentum oscillator is not showing any sign of divergence and overbought levels.
The Loonie asset is expected to add more gains after surpassing February 24 high at 1.3665, which will drive the asset toward the horizontal resistance plotted from December 07 high around 1.3700 followed by November 03 high around 1.3800.
Alternatively, a break below February 6 high at 1.3474 will drag the asset to near January 26 high around 1.3408. A slippage below the same will expose the asset to February 16 low around 1.3357.
USD/CAD daily chart
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As traders remain in a risk-off mood, the US Dollar (USD) is edging higher against its Canadian counterpart (CAD). This is largely due to the greenback’s safe-haven appeal that saw it make impressive gains during the previous trading session.
At the start of the week, the USD/CAD rate rose to a three-week high of 1.3687 on the back of strong buying momentum as traders sought refuge from more volatile assets. Despite some mild losses following the session, the pair is still seen trading higher for the week and further gains could be seen in the weeks ahead.
The market sentiment is likely to remain positive in the near term as the US economy continues to show signs of recovery amid the ongoing pandemic. This situation could prolong the current risk-off mood in the markets and will provide support to the US Dollar. At the same time, weak oil prices and an uncertain economic outlook could add downward pressure on the Canadian Dollar.
In terms of technicals, the outlook for the pair is bullish in the near term with immediate resistance at 1.3691. However, any losses could be seen below 1.3670 and investors should look for any major corrections over the next few sessions.
Overall, the USD/CAD rate is expected to make further gains in the pipeline above 1.3670 amid the current risk-off mood. The pair should remain supported by a strong US Dollar and a weak Canadian Dollar. Investors should look to take advantage of any bullish movements and look for any signs of corrections before committing to any long trades.
