Published on Jun 12, 2023

Daily Analysis For USD/CAD 12-06-2023

USD/CAD Analysis

Key Points: -

· The USD/CAD pair is experiencing its fifth consecutive day of declines as the US dollar faces renewed selling pressure.

· The bearish movement in crude oil prices could also potentially weaken the Canadian dollar (Loonie), limiting the losses for the USD/CAD pair.

· Traders appear to be hesitant as they await the release of the US Consumer Price Index (CPI) on Tuesday and the Federal Open Market Committee (FOMC) meeting on Wednesday, which could provide further direction for the pair.

Today's Scenario: -

The USD/CAD pair faced selling pressure after an initial increase to the 1.3355-1.3360 range on Monday. It has now declined for five consecutive days, with eight out of the last nine days showing a negative movement. The pair dropped further during the European session and approached a one-month low near the 1.3315-1.3320 level.

Despite a positive sentiment in equity markets, the US dollar failed to benefit as a safe-haven currency. This led to fresh selling pressure at the start of the week. The recent surprise rate hike by the Bank of Canada (BoC) continues to support the Canadian dollar (CAD) and adds downward pressure on the USD/CAD pair. However, several factors may prevent traders from placing significant bearish bets on the pair at the moment, limiting its losses.

Uncertainty surrounding the Federal Reserve's rate hike path, coupled with a slight increase in US Treasury bond yields, could provide some support for the US dollar. It is important to note that recent dovish comments from influential Fed officials have fueled speculation that the central bank may not raise interest rates during the upcoming two-day meeting ending on Wednesday. However, the market still anticipates a potential rate hike of 25 basis points at the July FOMC meeting due to ongoing concerns about inflation.

Moreover, concerns about a global economic slowdown impacting fuel demand have weighed on crude oil prices. This could weaken the commodity-linked Canadian dollar (Loonie) and offer some support to the USD/CAD pair. Traders may also adopt a cautious approach and wait for the release of the latest US consumer inflation figures on Tuesday and the highly-anticipated FOMC policy decision on Wednesday. These events will play a crucial role in determining the demand for the US dollar and shaping the pair's future direction.

Diagram of USD/CAD: -

Economic Events: -

Date Event Impact Currency

4:15 (New Zealand) Electronic Retail Card Spending YoY Low NZD

4:15 (New Zealand) Electronic Retail Card Spending MoM Low NZD

5:20 (Japan) PPI YoY Low JPY

5:20 (Japan) PPI MoM Low JPY

5:31 (Ireland) Construction PMI Low EUR

10:30 (Finland) Current Account Low EUR

11:30 (Japan) Machine Tool Orders YoY Low JPY

12:30 (Slovakia) Construction Output YoY Low EUR

13:30 (China) Total Social Financing Low CNY

13:30 (China) New Yuan Loans Low CNY

13:30 (China) M2 Money Supply YoY Low CNY

13:30 (China) Outstanding Loan Growth YoY Low CNY

13:30 (Switzerland) Myfxbook USDCHF Sentiment Medium CHF

13:30 (Australia) Myfxbook AUDUSD Sentiment Medium AUD

13:30 (Japan) Myfxbook USDJPY Sentiment Medium JPY

13:30 (European Union) Myfxbook EURUSD Sentiment Medium EUR

13:30 (United Kingdom) Myfxbook GBPUSD Sentiment Medium GBP

13:30 (Canada) Myfxbook USDCAD Sentiment Medium CAD

13:30 (New Zealand) Myfxbook NZDUSD Sentiment Medium NZD

15:15 (European Union) EU Bond Auction Low EUR

15:15 (European Union) 15-Year Bond Auction Low EUR

18:30 (Ecuador) Balance of Trade Low USD

18:30 (France) 3-Month BTF Auction Low EUR

18:30 (France) 12-Month BTF Auction Low EUR

18:30 (France) 6-Month BTF Auction Low EUR

20:30 (Kosovo) Inflation Rate YoY Low EUR

20:30 (United States) Consumer Inflation Expectations Low USD

21:00 (United States) 6-Month Bill Auction Low USD

21:00 (United States) 3-Year Note Auction Low USD

22:30 (United States) 3-Month Bill Auction Low USD

22:30 (United States) 10-Year Note Auction Low USD

23:30 (United States) Monthly Budget Statement Medium USD

Buy Scenario: -

The USD/CAD pair has experienced significant buying interest after testing a narrow demand zone between 1.3300 and 1.3315 on a four-hour chart. However, the 20-period Exponential Moving Average (EMA) at 1.3363 continues to act as a barrier for US dollar bulls. There is a horizontal resistance level around the high reached on June 5th at 1.3462.

The Relative Strength Index (RSI) with a period of 14 has attempted to break out of the bearish range of 20.00-40.00 and enter the range of 40.00-60.00, indicating a potential bullish reversal.

If the pair manages to break above the high reached on June 8th at 1.3388, it could drive the US dollar bulls further towards the June 5th high at 1.3462 and the psychological resistance level at 1.3500. Till we do not advise to buy USD/CAD.

Sell Scenario: -

On the other hand, if there is a breakdown below the support level at the round number of 1.3300, it could expose the USD/CAD pair to a fresh four-month low around 1.3274, followed by the low reached on November 15th, 2022, at 1.3226. Till we do not advise to sell USD/CAD.