The USD/CAD currency pair is enjoying a puny bout of ID FX strength, alternating between paltry increases and decreases. The recent Canadian federal election results reveal a stunning victory for incumbent Prime Minister Mark Carney’s Liberal Party. This victory has huge implications for the Canadian dollar. The election outcome is expected to bolster Canada’s position in trade negotiations with the United States, providing support to the domestic currency and capping USD/CAD’s intraday movements around key levels.
USD/CAD has been consolidating within a bearish continuation pattern. While the price action of the past two weeks has been range-bound, it certainly illustrates this movement. Analysts point out that the duo may represent a historic selling opportunity. This is particularly the case considering it floats at the 200-day Simple Moving Average (SMA), which is at the current psychological level of 1.4000. This macro technical indicator suggests resistance at higher levels. Short-term obstacles are in the 1.3870-1.3875 area, with 1.3900 marking the top of the short-term range.
The market dynamics are changing. If the USD/CAD keeps its strength above key thresholds, it may initiate a short-covering move, allowing the pair to shoot upward towards the 1.3950-1.3955 vicinity. Many traders remain cautious. The duo could speed up its decline toward the intermediate floor area of 1.3740 before likely challenging sub-1.3800 territory.
The currency trades near the key 1.3800 level, supported by recent US dollar dip-buying. Deeper appreciation for the USD looks beyond grasp as uncertainty swirls over Pres. Donald Trump’s tariff plans and the Fed’s plans for more aggressive easing. Consecutively, these factors have created a challenging trading environment and period for the USD/CAD currency pair.
Market participants are eagerly anticipating three key US macroeconomic releases later this week. These reports will continue to have a huge impact on the dollar’s strength compared to the Canadian dollar. Although all major economic data is important, any shifts in economic data may swipe investor sentiment and push or pull USD/CAD price action.
As many of you likely saw, crude oil prices recently crashed to a two-week low. This drop is complicated further by the mixed signals coming from the US-China trade war. Canada is the largest supplier of oil to the United States. Consequently, changes in crude prices lead to considerable changes in the CAD/USD exchange rate.
Nonetheless, the USD/CAD pair has suffered a significant retreat from its two-decade peak hit earlier this year back in February. This change is having a huge impact on market sentiment. With this in mind, bearish traders will gain momentum if the pair falls beneath the 1.3800 level. For this, they want it to slide even more, falling below the 1.3780 area. However, such movements would validate further declines, helping to cement a bearish outlook for the currency pair in the coming weeks.