The USD/CAD currency pair is currently experiencing a period of stability, trading around the 1.4065 level during the early European session on Friday. This positive momentum is being upheld as the pair remains positioned above the 100-period Exponential Moving Average (EMA). However, it’s important to note that the Relative Strength Index (RSI) is indicating overbought conditions, which may limit the potential for significant upward movement in the near term.
The demand for the US Dollar is showing signs of revival, offering a degree of support for the pair. In contrast, a recent drop in crude oil prices could negatively impact the Canadian Dollar. As Canada is the predominant oil supplier to the United States, fluctuations in oil prices have direct implications for the CAD’s value.
Analyzing the daily chart further reveals that the overall outlook for the USD/CAD remains positive while the pair holds above the critical 100-period EMA. Despite the promising positioning, the RSI hovering around 77.65 points to an overextended market, suggesting that consolidation may occur prior to any potential upward advancement.
The immediate resistance for the pair is identified at the 1.4070 level, which is at the upper boundary of the Bollinger Band. Successfully breaking past this level could set the stage for an upward movement toward the 1.4100 psychological level, and possibly reaching as high as 1.4173, which represents the high recorded on May 7, 2020.
On the downside, key support is identified at the 1.4000 level. A significant breach here could lead the pair towards the 1.3969 level, marking a low from November 13. The critical support area to monitor lies between 1.3905 and 1.3900, where the lower boundary of the Bollinger Band converges with the 100-period EMA, potentially acting as a strong defensive zone.
