During Friday’s European session, the USD/CAD pair surged to 1.3570, buoyed by a robust US Dollar. The trajectory of the Loonie asset suggests a continuation of its upward movement, buoyed by the persistent demand for safe-haven assets.
The US Dollar Index (DXY) soared to a fresh two-week high, reaching 104.20, propelled by positive Existing Home Sales data for February released on Thursday. The reported sales of pre-owned residences, totaling 4.38 million, marked the highest figure in a year, surpassing expectations of 3.94 million and the previous reading of 4.00 million. This data underscores an optimistic economic outlook for the United States, despite prevailing historically high interest rates ranging between 5.25% and 5.50%.
In contrast to other developed economies, the US economy appears stronger, supported by robust consumer spending and favorable labor market conditions. As a result, the Federal Reserve (Fed) is unlikely to rush for rate cuts, particularly with February’s inflation rate surpassing expectations, thus bolstering the US Dollar.
Conversely, price pressures in the Canadian economy are decelerating rapidly, raising expectations for the Bank of Canada (BoC) to implement interest rate cuts sooner rather than later.
Technically, the USD/CAD pair is approaching the horizontal resistance of the Ascending Triangle pattern observed on a daily timeframe, traced back to the high of December 7 at 1.3620. The upward-sloping border of this pattern originates from the low of December 27 at 1.3177, illustrating a notable volatility contraction.
Short-term sentiment remains bullish, with the 20-day Exponential Moving Average (EMA) near 1.3520 serving as a steadfast support level for US Dollar bulls.
The 14-period Relative Strength Index (RSI) fluctuates within the 40.00-60.00 range, reflecting investor indecisiveness.
A breakthrough above the December 7 high of 1.3620 would propel the USD/CAD pair towards the high of May 26 at 1.3655, followed by the psychological resistance level of 1.3700.
Conversely, a downward movement below the low of February 22 at 1.3441 could expose the pair to the low of February 9 at 1.3413. Further downside momentum could extend towards the low of January 15 at 1.3382.
