USD/CAD Buyers Strive for Control Ahead of Key Oil Reports

Market Overview

On Tuesday, the U.S. dollar weakened ahead of key speeches from Federal Reserve officials and the much-anticipated U.S. presidential debate. Investors are also awaiting inflation data due for release tomorrow, which could influence the outlook for interest rates. Historically, the dollar tends to lose ground before Federal Reserve easing cycles, and much of the current weakness stems from expectations of a soft landing for the U.S. economy.

However, some analysts believe the majority of the dollar’s recent decline has already occurred. Investors are closely watching the upcoming presidential debate, which may significantly impact the November elections. A victory for Donald Trump could boost the dollar, as his policies tend to favor higher tariffs and increased fiscal spending, both of which would likely lead to higher interest rates and a stronger dollar.

Technical Analysis

On the daily chart, USD/CAD is trading near its 10-day high, with buyers attempting to break the weekly resistance level of 1.35649 for the third consecutive day. If the bullish momentum persists and buyers successfully clear this level, the immediate target will be 1.35921. Continued control above this threshold would open the path to higher resistance levels at 1.36331 and 1.36650, where the 100-day moving average also intersects, adding to its significance.

Oscillator Confirmations:

RSI: The RSI is neutral, reflecting a balance between buyers and sellers with potential for further upside if buyers maintain momentum.

MACD: The MACD signals are mixed, showing no clear trend reversal but indicating possible consolidation in the near term.

Alternative Scenario

If sellers regain control, USD/CAD could retrace to the 34-day moving average, which acts as support at 1.35267. Should this level fail to hold, the pair may drop toward the next support at 1.34648. A break below this critical level would signal a return to the prior bearish trend.

Key Levels Overview

• Resistance Levels:
  • Resistance 3: 1.36650
  • Resistance 2: 1.36331
  • Resistance 1: 1.35921
  • Current Price: 1.35690
• Support Levels:
  • Support 1: 1.35267
  • Support 2: 1.34648

Key Events to Watch

Today’s oil market reports will be critical for USD/CAD traders. OPEC’s monthly supply and demand report, the American Petroleum Institute’s (API) weekly inventory data, and the International Energy Agency’s (IEA) energy outlook could heavily influence oil prices. Given Canada’s reliance on oil exports, any significant movement in oil prices will likely affect the Canadian dollar. Additionally, Federal Reserve officials’ speeches later today could offer fresh insights into the Fed’s policy direction, further influencing the dollar.

Conclusion

USD/CAD is hovering near key resistance levels, with buyers attempting to maintain control. A breakout above 1.35649 could lead to further gains toward 1.35921 and 1.36331. However, failure to breach this resistance could see the pair retrace to the 1.35267 support. Investors should closely monitor upcoming oil market reports and speeches from Federal Reserve officials, as these will be pivotal in shaping the pair’s short-term direction.