Sideways USD/CAD Awaits Key 1.3608 Breakout

Quick Look

• USD/CAD trades sideways around 1.3570 amidst mixed economic signals.
• Key resistance at 1.3608; breakout could target 1.3655 and 1.3700.
• The market is eyeing upcoming US Core PCE and Canadian GDP data for directional cues.
• Lower crude oil prices and recent GDP figures influence market sentiment.
• Technical indicators suggest upward momentum, with the pair above 50-day EMA and RSI above 60.

The USD/CAD pair has been navigating through a phase of consolidation, trading sideways around the 1.3570 mark. An ascending triangle formation, pointing to a potential breakout, frames this movement. The immediate resistance appears at the horizontal line of 1.3608. A decisive push above this threshold could set the stage for further ascension towards 1.3655 and possibly 1.3700.

On the flip side, the currency pair finds immediate support at 1.3441, corresponding to the low observed on February 22. Additional layers of support showed up at 1.3413 and 1.3382, marking previous lows in February and January, respectively. The context of potential downward pressures heightens the significance of these levels.

From a technical standpoint, the USD/CAD’s position remains above the 50-day Exponential Moving Average (EMA), currently at 1.3487, underscoring a bullish sentiment among traders. The Relative Strength Index (RSI) stands above the 60.00 mark, further validating this upward momentum and suggesting that the pair might be gearing up for a significant move.

Awaiting US PCE & Canada GDP: Market Cues

The trading dynamics of the USD/CAD pair are intricately linked to a slew of economic indicators and market sentiments. Specifically, upcoming data releases are set to play a critical role. These include the US Core Personal Consumption Expenditures (PCE) Price Index for January and Canada’s Gross Domestic Product (GDP) for the fourth quarter. These figures are anticipated to provide fresh impetus. For instance, the US PCE will show a 0.4% monthly increase. Furthermore, there is an anticipated annual underlying inflation slowdown to 2.8%. In contrast, Canada’s GDP is projected to exhibit a modest 0.2% growth for December. Notably, the Bank of Canada anticipates a flat growth rate for Q4 2023.

Moreover, recent economic developments also play a critical role in shaping market dynamics. For example, the downtrend in crude oil prices, with West Texas Intermediate (WTI) hovering near $78.10 per barrel, has been a boon for the USD/CAD pair, supporting its gains. Conversely, though robust, the US GDP’s annualized growth rate of 3.2% in Q4 fell slightly short of expectations, impacting sentiment. Additionally, Canadian economic indicators contribute to the broader narrative, such as a slight deceleration in weekly earnings growth and a marginally wider current account deficit.

Finally, the market’s reaction to these indicators, coupled with the stability of the US Dollar Index and evolving perspectives from the Federal Reserve, will be crucial in determining the USD/CAD’s path forward. As traders and investors brace for the upcoming data releases, the technical setup and economic backdrop provide a compelling narrative. This narrative underpins the currency pair’s short-term trajectory.