The USD/CAD currency pair edged higher during the Asian trading session on Friday, though it struggled to sustain upward momentum and remained below the psychologically significant 1.4000 mark. The movement comes amid conflicting market signals influencing the pair.
A stronger-than-expected Canadian Consumer Price Index (CPI) report earlier in the week tempered expectations for a significant rate cut by the Bank of Canada (BoC) in December. Additionally, the recent recovery in crude oil prices—bouncing back from a two-month low reached on Monday—has bolstered the commodity-linked Canadian dollar, commonly referred to as the Loonie, creating headwinds for the USD/CAD pair.
Nonetheless, the downside remains limited as the US Dollar continues to enjoy robust bullish sentiment, supported by market speculation that the Federal Reserve may maintain a less dovish stance in its monetary policy.
Technical Outlook:
From a technical perspective, the USD/CAD pair has displayed resilience, finding support near the 100-period Simple Moving Average (SMA) on the 4-hour chart. Positive oscillators on the daily chart indicate that the pair’s path of least resistance leans downward. However, the absence of significant buying interest calls for caution, leaving uncertainty about whether the recent pullback from the 1.4100 level—the highest since May 2020—has concluded.
Currently, immediate downside support is near the mid-1.3900s, marked by the 100-period SMA, and around the 1.3930 swing low. A decisive break below these levels could trigger a bearish momentum, potentially driving the pair toward intermediate support at 1.3860-1.3855. This could pave the way for a test of the monthly low around the 1.3820-1.3815 region, followed by the critical 1.3800 level. A sustained break below this threshold could signal deeper losses.
Conversely, a robust breakout above the 1.4000 psychological barrier would provide a bullish signal. Such a move could propel the pair past its weekly high of 1.4035 and target the 1.4100 level. Further gains may extend toward the 1.4170 region, the 1.4200 mark, mid-1.4200s, and potentially the 1.4300 zone, culminating near the 1.4340 supply area.
Traders should remain vigilant as mixed signals from economic fundamentals and technical indicators continue to shape the trajectory of the USD/CAD pair.
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