USD/CAD Buyers Push for Extended Control Amid Oil Weakness
Market Overview
On Monday, the USD/CAD pair continued to gain traction, driven primarily by two influential factors: a decline in oil prices and increased speculation that the Bank of Canada (BoC) may increase its pace of interest rate reductions. With oil being a key export commodity for Canada, falling prices have exerted downward pressure on the Canadian dollar, further supporting USD/CAD’s rally. Meanwhile, improving U.S. Treasury yields and market sentiment that the Federal Reserve may reduce the pace of rate cuts have given additional strength to the U.S. dollar.
Investors are now turning their attention to the upcoming BoC meeting, where a potential rate cut is expected. This outlook has led market participants to maintain a bullish stance on the USD/CAD pair, anticipating further gains if fundamental drivers persist.
Technical Analysis
In the hourly chart, USD/CAD is displaying a clear uptrend as buyers successfully broke above the 1.38143 level, pushing the price towards the immediate resistance at 1.38190. A sustained move beyond this resistance could open the door to higher targets at 1.38250, 1.38316, and ultimately 1.38423. These levels represent key resistance zones that, if breached, would likely signal a continuation of the bullish momentum.
The Relative Strength Index (RSI) is currently above the 50 mark, indicating increasing buying interest without entering overbought territory. This suggests there is room for further gains. Similarly, the MACD (Moving Average Convergence Divergence) has crossed into positive territory, reinforcing the bullish outlook as the histogram turns positive. The moving averages are also pointing upwards, providing dynamic support to the ongoing uptrend.
Alternative Scenario
Should the price fail to maintain its bullish momentum and drop below the critical support level at 1.37970, the bullish scenario would lose credibility. A break below this support could lead to a deeper pullback, prompting sellers to regain control and potentially push the pair lower in the near term.
Key Levels Overview
Resistance Levels:
- Resistance 1: 1.38190
- Resistance 2: 1.38250
- Resistance 3: 1.38316
- Resistance 4: 1.38423
Current Price: 1.38174
Support Levels:
- Support 1: 1.38143
- Support 2: 1.37970
Key Events to Watch
The focal point for this week is the Bank of Canada‘s policy meeting, where the central bank is expected to make a decision on interest rates. Market participants anticipate a rate cut, which could put further pressure on the Canadian dollar, reinforcing the USD/CAD’s upward trajectory. Traders should also closely watch developments in U.S. Treasury yields and any shifts in sentiment around Fed policy, as these factors will play a crucial role in determining the pair’s direction.
Conclusion
The USD/CAD pair remains in bullish territory, with buyers pushing the price higher amid a supportive backdrop of falling oil prices and expectations of a dovish BoC. A decisive move above 1.38190 could pave the way for further gains, while a break below 1.37970 would signal a shift in momentum. Market participants should stay alert to upcoming BoC policy announcements and U.S. economic data for cues on the next potential move.
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