USD/CAD analysis and talking points
- The FOMC Meeting Minutes keep the Canadian Dollar under pressure.
- Canadian and US economic data will be released later today.
- The rising wedge breakout looms.
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Canadian dollar basic background
The Canadian dollar enjoyed marginal gains against the US dollar during the first half of 2023 but the recent weakness has pushed the pair to a major inflection point. The dollar gained support after the more hawkish comments from the Federal Reserve, which were repeated in yesterday’s FOMC meeting minutes. The majority of respondents have eluded further monetary policy tightening at some point this year, but with fundamental data sluggish, data reliance will be more important than ever, particularly in the case of inflation and jobs data.
Later today, Introduction to the US Labor Market will be announced through the ADP and the release of jobless claims. Although history shows these numbers have not been reliable as a measure of non-farm payroll (NFP) printing but they will provide some short-term volatility regardless. The focal point for today will be the release of the US ISM Services PMI due to the US being primarily a services driven economy. This measure has been on the decline lately but expectations are for a slight improvement that could give the US dollar some support. Canadian PMI is also due but is likely to be overshadowed by US reports.
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USD/CAD Economic Calendar (GMT +02:00)
source: DailyFX Economic Calendar
Technical Analysis
USD/CAD daily chart
Chart created by Warren VenkitasI.G
The daily price action of USD/CAD has the pair within a rising wedge chart formation (black dashed line) with prices approaching the top point along with the 1.3300 psychological level. With this in mind, a breakout below wedge support would be the natural course of action to open subsequent support areas after that. A confirmation close above wedge resistance will invalidate the bearish pattern giving the bulls a clear rally towards the 50 day moving average (yellow).
Key resistance levels:
- 1.3407
- 50-day moving average (yellow)
- 1.3300
Key support levels:
- wedge support
- 1.3263
- 1.3226
- 1.3200
IG client sense data: smitten
The IGCS shows that retailers are currently on board long On the US dollar / Canadian dollar, with 68% of traders who are currently holding long positions (as of this writing). At DailyFX, we usually take a contrarian view of crowd sentiment which results in a short-term bearish bias.
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