The USDCAD has been showing signs of potential upside as buyers establish support in the market. Over the last 4-5 trading days, the currency pair has been consolidating after reaching highs on Tuesday and Wednesday of last week. Despite seeing lower highs in recent days, the price has found a strong floor near 1.3564, just above the rising 200-hour moving average at 1.35596. This level is key for buyers, as staying above it indicates their strength in the short term.
Key Levels to Watch
In order for the USDCAD to see further upside potential, it needs to break through key resistance levels. The price must surpass the high from Friday at around 1.3600, followed by the high from Thursday at 1.36038. Breaking through these levels would then require a move above the swing area between 1.3615-1.3622. Finally, a significant move above the falling 200-bar moving average on the 4-hour chart and the 38.2% retracement level of the move down from the August high at 1.3633 would signal a strong bullish momentum.
Fundamental Factors at Play
The Federal Reserve’s upcoming decision is a major factor influencing the USDCAD. With a 57% chance of a 50 basis point cut expected on Wednesday, this could initially be bearish for the currency pair. However, the Bank of Canada has already implemented a 50 basis point cut with more potential cuts on the horizon due to rising unemployment risks. The latest employment report revealed a 6.6% unemployment rate, the highest since 2017 if excluding the Covid period between 2020 and 2021. This data underscores the challenges facing the Canadian economy and the potential for further monetary policy easing.
As buyers look to establish support and drive the USDCAD higher, they must demonstrate their commitment by breaking through key resistance levels. The technical indicators suggest a potential upside if these levels are breached, but the fundamental factors, including central bank decisions and economic data, will also play a significant role in shaping the currency pair’s direction in the coming days.
Overall, the USDCAD is at a critical juncture, with buyers seeking to maintain support above key levels while facing resistance ahead. The interplay between technical and fundamental factors will likely determine the currency pair’s next moves, making it a crucial time for traders to closely monitor developments and adjust their strategies accordingly.
