USDCAD Under Pressure: Geopolitical Turmoil and Rising Oil Prices Impact the Loonie

The USDCAD is dropping as geopolitical unrest is causing oil prices to surge by more than 4%, putting pressure on the Loonie as Canada is one of the largest oil exporters. Moreover, with expectations of interest rate cuts at the next meeting in September factored into the market, the downward pressure on the currency is increasing. Traders will closely monitor the USDCAD today and tomorrow as significant economic data that could impact currency valuations is set to be released.

High Impact Economic Events

Thursday 11:00(GMT+0) – UK: BoE Interest Rate Decision (GBP)

Thursday 14:00 am (GMT+0) – USA: ISM Manufacturing PMI (USD)

Friday 12:30 am (GMT+0) – USA: Nonfarm Payrolls (USD)

After reaching the support level of 1.35882 on July 11, the USDCAD experienced an upward trend, with the exchange rate hitting a year-high of 1.38646 on July 29. The price remained above both the 20- and 50-period Exponential Moving Average (EMA), and the Momentum oscillator stayed above its 100 baseline, supporting the upward trajectory. However, the Uptrend Channel and the Relative Strength Index provided conflicting signals. The price fell and closed below the Uptrend Channel, indicating weakness in the bullish momentum. Another close below the Channel by the end of the day could signal a bearish reversal. Additionally, after moving into the overbought area, the Relative Strength Index crossed below 70, indicating a possible reversal to the downside.

Should the buyers maintain market control, traders may direct their attention toward the three potential resistance levels below:

1.38646: The primary resistance level is determined at 1.38646, corresponding to the record high for 2024.

1.39406: The second resistance level is estimated at 1.39406, calculated as the R2 resistance using the weekly Pivot Points method.

1.39764: The third resistance level, 1.39764, represents the peak marked in October 2022.

Should the sellers gain market control, traders may consider the four potential support levels listed below:

1.37869: The primary downside target is set at 1.37869, reflecting an internal trendline recorded on July 31.

1.37590: The second support level is 1.37590, estimated as the 38.2% Fibonacci Retracement between the swing low at 1.35882 and the swing high at 1.38646.

1.36938: The third support line is defined at 1.36938, calculated as the 61.8% Fibonacci Retracement of the most recent swing.

1.35882: An additional downward target is observed at 1.35882, which marks the beginning of the rally.

The USDCAD is facing pressure due to rising oil prices and expected interest rate cuts, which is affecting the Canadian dollar since Canada is a major oil exporter. Important economic data releases will be crucial for traders, including the Bank of England’s rate decision, ISM Manufacturing PMI, and US Nonfarm Payrolls.

From a technical standpoint, after reaching a year-high of 1.38646 on July 29, the USDCAD has displayed signs of weakening bullish momentum. The price has closed below the Uptrend Channel, and the RSI indicates a potential reversal. Key resistance levels to monitor are 1.38646, 1.39406, and 1.39764, while support levels are 1.37869, 1.37590, 1.36938, and 1.35882. Upcoming economic data and geopolitical developments will likely influence the pair’s direction.