USD/CAD is Riding the Ascending Trendline
- Hawkish Fed outlooks support the US dollar.
- The upcoming US Consumer Confidence Index and the Canadian GPD may give the pair a new high.
- Increasing crude oil prices strengthened the CAD but failed to cap USD/CAD gains.
- The 1.35766 acts as critical support for the pair.
USD/CAD Fundamental Analysis
USD/CAD is trading at $1.3605, up by 0.22% in 24 hours. As the traders continue their hawkish repricing of interest rate forecasts for the Federal Reserve, the strength of the US dollar has limited CAD rises.
Expectations of Fed rate hikes supported US Dollar
On February 27, the US Census Bureau released data showing that headline durable goods orders decreased by 4.5% in January. However, orders excluding transportation goods, which increased by 0.7% during the reporting month, outweighed the disappointment.
Moreover, several FOMC officials have emphasized the urgency to continue interest rate hikes to lower inflation to the 2% target. Therefore, it supports the Dollar while offsetting mixed US data. As a result, the Dollar Index traded 0.06% higher at 104.74 and supported the rising prices of USD/CAD for the day.
Upcoming data from US and Canada
Today during American Trading Hours, Statistics Canada will release a report describing the fourth quarter’s gross domestic product (GDP). Traders are anticipating the Q4 GDP data, anticipated to reveal an economic slowdown to 1.5% y/y. However, given the Bank of Canada’s strategy of not raising interest rates, the results may have minimal impact on the CAD.
Furthermore, investors are looking forward to the February Consumer Confidence Survey. Any indications of resiliency in the US economy give the Fed greater flexibility to raise interest rates, which is good for the Dollar and the market sentiments.
Both these economic data will have a great impact on USD/CAD pair.
Rising crude oil is also not enough to cap USD/CAD gains
The market losses were severe due to concerns about increasing interest rates and sluggish economic development. However, oil prices rebounded as traders anticipated more indications from Chinese business activity figures, the PMI due on March 01.
WTI crude futures increased 1.16% to $76.56 per barrel. The rising price of oil also supported the commodity-linked CAD. However, it failed to cap the daily gains in the forex pair USD/CAD as it was following the strength of the US dollar for the day.
USD/CAD Technical Analysis
The H4 Chart Outlook of USD/CAD suggests that the forex pair has reached a critical support level of 1.35766. This support level is where the 20-Day Simple Moving Average meets the ascending trendline. The currency pair has been riding the trendline smoothly; however, now it seems there are chances it could drop below. Any break below this level would add further pressure on the pair to fall towards the initial support of 1.35465. If the bears remain active, they could drag down the prices further towards the 50-Day SMA level at 1.35212. Here the pair might receive strong support.
On the other hand, the bullish scenario suggests that the pair will keep on riding the trendline and will face first resistance at 1.36274. If bulls remain active, they will push forward the price towards the weekly resistance area.
The technical indicators are also suggesting that prices might continue rising in the short run. The Relative Strength Index (RSI) value near 60 suggests there is still more room for the pair to enter the overbought zone before a trend reversal. Furthermore, the Moving Average Convergence & Divergence Histograms’ clear appearance above the zero line also suggests heavy buying pressure in the market. It seems like the currency pair USD/CAD will likely continue to follow the trend in the short run.
USD/CAD Daily Technical Levels
Pivot Point: 1.3578