USD/CAD Fundamental Analysis
During early trading hours on Tuesday, USD/CAD forex pair extended its gains and reached near its one-week high level at 1.3500. The currency pair experienced high demand during Asian and European Trading sessions ahead of the Canadian GDP release.
In November, the Canadian GDP grew by 0.1%, as stated by Statistics Canada. The services-producing sector was the top-performing industry, with a 0.2% gain. At the same time, the goods-producing sector reported a decline of -0.1%. The December GDP was also flat. In comparison, the GDP of the real industry in Q4 grew by 0.4%, with 3.8% throughout the year.
Meanwhile, on the US side, the Dollar Index (DXY) was also getting strength ahead of its Fed policy decision. The greenback has been rising for two days as investors believe that Fed is the only central bank that has reduced inflation through aggressive rate hikes.
The US Federal Reserve has already unveiled its plans to remain open to tightening monetary policies in case of the same market conditions. Fed is expected to announce its decision for interest rates tomorrow, and investors are betting on 25bps this time.
Furthermore, the rising prices of USD/CAD could also be attributed to the weakness in CAD amid the declining prices of Crude oil. The commodity-driven currency, CAD, was weighed down after WTI Crude Oil kept on declining for 2nd consecutive day on Tuesday. Oil was dropping more than 3% as the looming increases in interest rates weighed on demand. In addition to this, Russian exports were also strong despite a European Union ban and G7 price cap.
USD/CAD Technical Analysis
The technical outlook of the H4 chart of USD/CAD shows that the currency pair will likely experience selling pressure in the next hours of the trading session. The pair is already moving above the 100-Day SMA (orange line). However, it seems like sellers will take control ahead of the US economic data release.
The RSI near the 60 levels after touching the overbought zone is giving reversal signals. Furthermore, the signal is backed by the Stochastic Oscillator with a blue signal line crossing the red dotted signal line from above. Also, it has crossed the overbought level from above, suggesting a reversal ahead.
There are more chances of a price decline than a price rebound. If the price keeps on falling, it will face first rejection and support at 100-Day SMA (orange line). After that, the 20-Day Simple Moving Average (red line) near the 1.33586 level is standing at second support. Any break below this level will trigger a massive bearish trend towards the psychological level of 1.33038.
On the other hand, the bullish scenario suggests that a break above the first resistance (R1) at 1.34478 will push the prices towards the second resistance (R2) at 1.3490.
Daily Technical Levels
Pivot Point: 1.3358