The USD/CAD currency pair remains trapped in a narrow trading range just below the important 1.3900-figure. Economic expectations as we build up towards Tuesday, it’s an anticipation of the European session. Traders seem unsure about the market’s direction at this point. They say they’re closely monitoring economic indicators for hints on where the future lies. As you can see from the chart above, the pair is currently trading below its 50-day Simple Moving Average (SMA). This decrease trendline indicates a very bearish picture.
Market participants have been closely watching the progression of economic data. The US Consumer Price Index (CPI) next week will be another major catalyst for volatility in the USD/CAD currency pair. The excitement over this data is a testament to the economic backdrop that’s putting upward pressure on currency valuations.
Current Trading Conditions
As of Tuesday, USD/CAD has been bouncing in a narrow range, unable to overcome the 1.3900 level with conviction. The duo’s recent price action highlights a bearish phase of price action, consolidating under resistance, with each attempt failing to close above the 1.3890 mark. Such price action is a sign that traders continue to play it safe, waiting for more clear-cut signals before establishing large flows.
With the 50-day SMA still on a downward slope, that keeps USD/CAD firmly in bearish territory. This important technical indicator shows that the sellers remain in control. If price ends above 1.3948 it may pave the way to thicker resistance obstacles like the 78.6% Fibonacci retracement at 1.4030. On the other hand, if bulls fail to reclaim the above mentioned levels of interest, we could see further consolidation below resistance.
Technical Analysis and Fibonacci Retracements
From a technical standpoint, Fibonacci retracements serve an important function in forecasting possible price actions for the USD/CAD. The recent high of 1.4134 and the most recent low of 1.3646 point to significant retracement levels. Today, these tiers serve as intense obstacles for the duo. The 50% Fibonacci level is situated at 1.3890, while the 61.8% level rests at 1.3948, both effectively capping any rallies.
Even with these supportive retracement levels in place, it’s clear that USD/CAD is facing an uphill battle to build meaningful bullish momentum. Looking closely at price action around these levels can provide a wealth of information. These clues will hint at what traders are doing in response to improving market and positive economic data.
Influence of Crude Oil Prices
A second important factor impacting the USD/CAD pair is the recent spike in crude oil prices. In fact, Canada is one of the world’s largest crude oil exporters. During periods of strengthening oil prices, the Canadian dollar—often referred to as the Loonie—receives upward pressure. This commodity-linked dynamic adds moderate downward pressure on USD/CAD. Consequently, the duo finds it difficult to build bullish momentum past key resistance levels.
Oil prices are holding buoyant so providing a stiff underlying headwind for the USD/CAD. Traders are getting a sense of how this could impact Canada’s economic outlook.