USDCAD Under Pressure: Market Dynamics, Geopolitical Tensions, and Key Data Awaited

After the Bank of Canada reduced the key interest rate by 25 basis points to 4.5% in July, the USDCAD decreased due to geopolitical tensions, rumors of a potential recession in the US, falling oil prices, and volatile financial markets. This exerted pressure on the US Dollar vs. the Canadian dollar (the Loonie) as Canada is a major oil exporter. Additionally, the upcoming release of the Ivey PMI later today and Canada’s Employment Change data on Friday may provide valuable insights into the future direction of the Loonie.

High Impact Economic Events

Wednesday 14:00 (GMT+0) – Canada: Ivey PMI (CAD)

Friday 12:30 (GMT+0) -Canada: Employment Change (CAD)

After reaching the year’s highest price at 1.39459 on August 5, the bears took over the market, and as a result, the USDCAD exchange tumbled by 1.36%. Additionally, the formation of a bearish chart reversal pattern, known in technical analysis as a non-failure swing, opened the way for a further decrease in prices. Specifically, the peak at 1.39459 exceeded the previous peak, and subsequently, prices violated the trough at 1.37869, hence the non-failure swing. Technical indicators and oscillators show mixed signals. In particular, the price dropped below the 20-period Exponential Moving Average (EMA) but remained above the 50-period EMA. The Momentum oscillator has yet to cross the 100 baseline, where the relative strength index (RSI) demonstrated the strongest signal, according to its developer, Welles Wilder. After moving into the overbought area, the RSI crossed below 70, forming a failure swing, signaling a possible reversal to the downside.

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

1.37913: The primary resistance level is determined at 1.37913, corresponding to a daily high marked on June 11.

1.38490: The second resistance level is estimated at 1.38490, calculated as the weekly Pivot Point using the standard method.

1.39112: The third resistance level, 1.39112, represents the (R1) resistance estimated using the weekly Pivot Points tool.

1.39459: An additional resistance is seen at 1.39459, corresponding to the year’s highest price.

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

1.37549: The primary downside target is set at 1.37549, reflecting an up-fractal recorded on July 2.

1.37080: The second support level is 1.37080, estimated as the (S3) support using the weekly Pivot Points method.

1.36527: The third support line is defined at 1.36527, reflecting an internal trendline recorded on July 5.

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

The recent developments in the USDCAD exchange rate highlight the impact of macroeconomic factors, geopolitical turbulence, and technical indicators on market movements. The Bank of Canada’s interest rate cut, alongside geopolitical tensions and declining oil prices, have pressured the Loonie. Key economic events like the Ivey PMI and Canada’s Employment Change will provide further insights into its trajectory. Chart analysis indicates a bearish reversal pattern, with mixed signals from technical indicators. Traders should monitor key resistance and support levels to navigate potential market directions, as the interplay between economic data and technical factors will likely shape the USDCAD’s future movements.