USD/CAD Bears Eye Further Decline
Wednesday Market Overview:
The USD/CAD pair is trading in a downward trajectory, driven by the cooling U.S. labor market and the rising likelihood of a Federal Reserve rate cut in September. Additionally, the stabilization of global oil prices, ahead of key economic data releases from both Canada and the U.S., is exerting further downward pressure on this currency pair. The Canadian dollar is benefiting from resilient oil prices, as Canada’s economy heavily relies on its energy exports.
Technical Analysis:
In the 4-hour chart, USD/CAD has completed a bearish head-and-shoulders pattern and is now entrenched in a descending trend. Sellers have successfully pushed the price below the support at 1.37926, and the pair is currently testing the key support level at 1.37537, which aligns with the 200-period moving average.
If sellers manage to break below this critical support, it would open the door for further declines towards 1.37297 and eventually the 1.36908 level. The RSI and MACD indicators are both aligned with this bearish outlook; the RSI is trending lower, suggesting strengthening bearish momentum, while the MACD histogram remains below the signal line, confirming ongoing selling pressure.
Alternative Scenario:
Should the 200-period moving average at 1.37537 hold as a support, it could trigger a bounce back. However, for buyers to regain control and shift the market sentiment towards a bullish outlook, they would need to push the price above the right shoulder of the head-and-shoulders pattern at 1.38555.
Oscillators Confirmation:
Both the RSI and MACD are confirming the bearish sentiment, with the RSI declining towards oversold territory and the MACD maintaining a bearish crossover. These oscillators suggest that sellers currently have the upper hand, but a reversal could occur if support levels are defended, and fundamental data turns in favor of the U.S. dollar.
Key Levels:
Resistance Levels:
- Resistance 3: 1.38555
- Resistance 2: 1.38166
- Resistance 1: 1.37926
Current Price (at the time of analysis): 1.37748
Support Levels:
- Support 1: 1.37537
- Support 2: 1.37297
- Support 3: 1.36908
Fundamental Factors and Market Sentiment:
Key economic events that could influence USD/CAD on Wednesday include the Ivey PMI from Canada, which is expected to come in lower than the previous period, and the U.S. 10-year Treasury note auction. Additionally, the U.S. weekly crude oil inventory report is of particular interest, given its potential to influence oil prices and, by extension, the Canadian dollar. A smaller-than-expected drawdown in oil inventories could signal robust demand, supporting oil prices and further strengthening the Canadian dollar against its U.S. counterpart.
Conclusion:
USD/CAD is currently navigating a bearish path, with the pair facing critical support at the 1.37537 level. Technical indicators suggest that further declines are likely if this support fails to hold. However, the outcome will largely depend on upcoming economic data, particularly from Canada, and developments in the oil market. Traders should remain alert to these fundamental triggers, as they could lead to significant volatility in the pair’s price action.
Find us on
