USD/CAD rising on Declining Crude Oil and Strong USD

USDCAD Fundamental Analysis

  • The stronger USD and concerns about weak demand growth weigh the oil price.
  • The Canadian Dollar failed to gain because falling oil prices continued a bearish market sentiment.
  • The situation seems in favour of USD/CAD ahead of the Canadian CPI and the US PMIs.

Currently, the forex pair USD/CAD is up +0.11% from its previous day’s level, getting bets from the strong US dollar and declining oil prices. The US Dollar Index (DXY), which measures the value of the greenback against the basket of six major currencies, was up +0.22% at 104.09. The dollar is gaining strength ahead of the release of the US Manufacturing and Services PMI.

Oil prices are low, putting pressure on the Canadian dollar

The Fed raised interest rates by 25 basis points earlier this month, which was the eighth hike since March 2022. Furthermore, it gave suggestions that future rate rises would be possible.

Because of the strong US dollar and worries about more monetary tightening by the US Federal Reserve, oil prices fell in morning trade. WTI crude oil declined by around 0.14% in one day, resetting its daily low at almost $76.14.

The commodity-linked currency fell amid the declining Crude Oil prices, keeping the currency pair USD/CAD green for the day.

Upcoming Canada’s CPI and Retail Sales data

Today, market participants are awaiting the January CPI for Canada and the CPI Core from the Bank of Canada (BoC). Furthermore, investors look to the statistics on retail sales for further indications of the economic condition.

As the BoC has already hinted at a rate halt after raising interest rates to 4.5%, investors will be watching the numbers for the economy’s outlook to take immediate action respectively.

The BoC may feel pressured to restart its rate hike cycle because of the upgrade to Canada’s CPI since the core inflation rate is expected to rise to 5.2% annually. Furthermore, the Canadian Dollar may gain value if BoC indicates prolonged price hikes.

US PMI is on Focus

The February Flash Service Purchasing Managers Index (PMI) for the United States is set to be released today. The Services PMI is expected to reach 47.3, up from its previous figure of 46.8.

The figures of the US PMI data for February will be crucial for the US Dollar before the minutes from the Federal Open Market Committee’s (FOMC) monetary policy meeting on Wednesday, February 22. Moreover, the US Fed hopes to support the US Dollar’s recovery by being hawkish.

USD/CAD Technical Analysis

USD/CAD Technical Analysis

The Technical Outlook of the Daily Chart of USD/CAD shows that the price is currently staying at the 50-Day Simple Moving Average of 1.3464. On the upside, the 100-Day SMA acts as the initial resistance for the currency pair. Any break above the sloping line of descending triangle would trigger a massive bullish rally towards the weekly resistance area.

On the downside, the pair will see first support at the 20-Day SMA at the 1.33852 level. Any break below this level would further drag the prices towards the weekly support area. Overall, the pair is currently moving in consolidation with daily gains. The Relative Strength Index (RSI) Indicator below and Stochastic Oscillator show that the price has not reached the overbought region yet. There might be a chance for further upside. However, the leaning line of the descending triangle would act as initial resistance.

The idea is to wait before taking any position as of yet. Taking buying position on any break above the trend line and a selling position on any break below the 1.33852 level is advisable.

Daily Technical Levels:       


Pivot Point: 1.3463                            

It is only when we take chances, when our lives improve. The initial and the most difficult risk that we need to take is to become honest.

Walter Anderson