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USD/CAD Sellers Target Short-Term Support Amid Oil Price Rally

USD/CAD Sellers Target Short-Term Support Amid Oil Price Rally

Market Overview

On Thursday, oil prices rose by over 1% due to concerns that Hurricane Francine might disrupt production in the United States, the world’s largest oil producer. However, lingering worries about declining global demand tempered the upside in oil prices. The stronger oil market has supported the Canadian dollar, given its status as a commodity-driven currency. As a result, USD/CAD has extended its decline for the second consecutive day, testing key daily support levels.

Technical Analysis

In the one-hour chart, USD/CAD is trading in a bearish environment, having formed a lower high at 1.35663 and remaining below both the 34- and 100-period moving averages. The appearance of a death cross, where the shorter 34-period moving average crosses below the longer 100-period average, further underscores the bearish sentiment.

Currently, sellers are focusing on breaking the short-term support at 1.35613. Momentum indicators align with this bearish outlook, with the RSI drifting lower into the oversold territory and MACD bars crossing below the signal line, both signaling a continuation of downward pressure. If the bearish momentum persists, traders will eye the next support levels at 1.35537 and 1.35478, with an extended target at 1.35352.

Oscillator Confirmations

RSI: Trending lower within the bearish zone, approaching oversold conditions.

MACD: Negative bars continue below the signal line, reinforcing the downward trend.

Moving Averages: Both the 34-period and 100-period moving averages indicate sustained bearish momentum.

Alternative Scenario

However, if buyers regain control, a rebound could challenge the immediate resistance at 1.35734, which coincides with the 34-period moving average. A further break above this resistance could bring 1.35848 into focus. A sustained move above this level would invalidate the current bearish outlook and suggest a shift toward a short-term bullish trend.

Key Levels Overview

  • Resistance Levels:
    • Resistance 2: 1.35848
    • Resistance 1: 1.35734
    • Current Price: 1.35654
  • Support Levels:
    • Support 1: 1.35613
    • Support 2: 1.35537
    • Support 3: 1.35478
    • Support 4: 1.35352

Key Events to Watch

Investors should keep an eye on critical economic data releases that could introduce volatility in the USD/CAD pair. In the U.S., the weekly jobless claims report is expected to provide insights into the labor market’s health, which remains a key focus for the Federal Reserve. In Canada, building permits data will also be closely watched, as it provides a glimpse into the country’s construction sector, a vital part of its economic health.

Conclusion

USD/CAD remains under selling pressure, driven by a combination of stronger oil prices and technical factors. The pair is currently targeting key short-term supports at 1.35613 and 1.35537. Momentum indicators reinforce the bearish outlook unless buyers manage to reclaim the key resistance at 1.35734. Investors should closely monitor labor market data from the U.S. and building permits data from Canada, both of which are likely to play pivotal roles in shaping near-term market sentiment.

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