The USD/CAD currency pair is currently navigating a tight trading range, influenced by a mix of opposing economic factors. A decrease in expectations for a significant rate cut from the Bank of Canada (BoC) combined with a rise in crude oil prices is bolstering the Canadian dollar. Meanwhile, the U.S. dollar remains strong, buoyed by a prevailing bullish sentiment that signals a potential shift in the Federal Reserve’s approach to monetary policy.
In the latest trading session, the USD/CAD pair tried to gain momentum but fell short of decisively breaking the psychological barrier of 1.4000. Recent Canadian consumer price index data prompted the market to reassess the likelihood of a major rate reduction by the BoC later this year. Moreover, a rebound in crude oil prices, which had touched a two-month low earlier in the week, continues to lend support to the commodity-sensitive Loonie. Despite this, the U.S. dollar’s solid footing prevents any significant downward movement in the USD/CAD exchange rate.
Technical analysis indicates that the USD/CAD pair is currently facing resistance below the 100-period Simple Moving Average on the four-hour chart. While internal indicators suggest a downward trend, caution is warranted due to a lack of substantial buying interest. This suggests that the recent retreat from the 1.4100 peak may not be over yet, particularly as traders weigh potential movements.
On the downside, pivotal support appears to be located in the mid-1.3900s, with the immediate risk being a break below the 1.3930 zone. Such a move could trigger further declines towards the 1.3860 – 1.3855 range, potentially leading to the monthly low of around 1.3820. Conversely, if the USD/CAD maintains strength above the 1.4000 level, it could signal a bullish trend, paving the way for a climb above 1.4035 and eventually towards 1.4100 and beyond.
