Daily Analysis For USD/CAD  20-06-2023

Daily Analysis For USD/CAD 20-06-2023

USD/CAD Analysis


Key Points: -


·       USD/CAD continues to gain momentum for the second consecutive day, extending its recovery from the year-to-date low.


·       The Canadian dollar (CAD) faces pressure due to lower oil prices, which in turn provides support to the USD, benefiting from a modest strengthening.


·       The USD receives some support from an increase in US bond yields and a slightly cautious market sentiment, favoring the demand for the safe-haven currency.


Today's Scenario: -


The USD/CAD pair continues to build on its modest recovery from its lowest level since September 2022, gaining positive traction for the second consecutive day on Tuesday. During the Asian session, spot prices maintain a bullish tone and are currently trading around the 1.3225-1.3230 region, representing a 0.15% increase for the day.


The decline in crude oil prices persists due to concerns about a global economic slowdown, particularly in China, which is expected to impact fuel demand. Consequently, the commodity-linked Canadian dollar (CAD) is undermined, while the modest strength of the US dollar (USD) acts as a tailwind for the USD/CAD pair. It's important to note that recent macroeconomic data from China indicates a loss of momentum in the world's second-largest economy compared to earlier this year.


Despite reports of China considering an extensive stimulus package to bolster economic support and the expected reduction of one-year and five-year Loan Prime Rates (LPRs) by the People's Bank of China (PBoC), market concerns persist. This is evident from the prevailing cautious sentiment, coupled with an increase in US Treasury bond yields, which leads to a third consecutive day of gains for the safe-haven USD and provides support for the USD/CAD pair.


Although the Federal Reserve (Fed) refrained from raising interest rates last week, they signaled the possibility of a rate hike by as much as 50 basis points by the end of this year. The market reacted swiftly and is currently pricing in another 25 basis points increase during the July FOMC meeting, contributing to a rise in US bond yields. However, recent softer economic data from the United States raises questions about the Fed's scope for further rate hikes.


Therefore, market attention now turns to Fed Chair Jerome Powell's congressional testimony on Wednesday and Thursday. Investors will closely analyze his remarks for any fresh indications regarding the future path of rate hikes. These insights will play a crucial role in determining the near-term direction of the USD and offer meaningful impetus to the USD/CAD pair. In the meantime, traders should monitor oil price dynamics for short-term trading opportunities around key levels.


Diagram of USD/CAD: -


Economic Events: -


Date      Event                                                                                            Impact        Currency

 02:30   (New Zealand) Westpac Consumer Confidence                               Low NZD

 06:45   (China) Loan Prime Rate 1Y                                                       Medium    CNY

 06:45   (China) Loan Prime Rate 5Y                                                       Medium    CNY

 07:00   (Australia) RBA Meeting Minutes                                      High  AUD

 07:05   (Australia) RBA Kent Speech                                                       Medium   AUD

 09:00   (Australia) RBA Bullock Speech                                                  Medium   AUD

 10:00   (Japan) Industrial Production MoM                                     Low  JPY

 10:00   (Japan) Industrial Production YoY                                       Low  JPY

 10:00   (Japan) Capacity Utilization MoM                                      Low  JPY

 10:30   (Estonia) PPI YoY                                                                  Low     EUR

 10:30   (Estonia) PPI MoM                                                                             Low     EUR

 10:30   (Finland) Unemployment Rate                                                          Low   EUR

 11:30   (Germany) PPI MoM                                                                   Medium    EUR

 11:30   (Germany) PPI YoY                                                                             Low     EUR

 11:30   (Switzerland) Balance of Trade                                                  Medium   CHF

 13:30   (Euro Area) Current Account                                                              Low   EUR

 13:30   (Euro Area) Current Account s.a                                                        Low   EUR

 13:30   (Greece) Current Account                                                    Low   EUR

 13:30   (Euro Area) ECB Enria Speech                                                             Low   EUR

 14:30   (Euro Area) Construction Output YoY                                               Low  EUR

 14:30   (Italy) Current Account                                                                      Low     EUR

 14:30   (United Kingdom) 5-Year Treasury Gilt Auction                                Low GBP

 15:00   (Germany) 2-Year Schatz Auction                                       Low  EUR

 15:30   (Portugal) PPI YoY                                                                               Low     EUR

 15:30   (Portugal) PPI MoM                                                                           Low     EUR

 15:30   (Luxembourg) Unemployment Rate                                     Low  EUR

 15:30   (Slovakia) Unemployment Rate                                                         Low   EUR

 16:00   (United States) Fed Bullard Speech                               Medium USD

 17:15   (Euro Area) ECB McCaul Speech                                                       Low    EUR

 18:00   (United States) Housing Starts                                                  Medium    USD

 18:00   (United States) Building Permits                                                      High   USD

 18:00   (United States) Housing Starts MoM                                        Medium  USD

 18:00   (United States) Building Permits MoM                                     Medium  USD

 19:00   (Slovenia) Unemployment Rate                                                        Low    EUR

 19:15   (Euro Area) ECB McCaul Speech                                                       Low    EUR

 20:30   (New Zealand) Global Dairy Trade Price Index                                  Low NZD

 21:00   (United States) 3-Month Bill Auction                                                Low  USD

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

 21:15   (United States) Fed Williams Speech                                          Medium USD

 22:30   (El Salvador) Balance of Trade                                                            Low   USD

 22:40   (Euro Area) ECB Guindos Speech                                        High EUR


Buy Scenario: -


USD/CAD pair broke below a support trendline that originated from the November 2022 lows, surpassing the level around 1.3314. This led to a further decline, pushing the USD/CAD to new year-to-date (YTD) lows of 1.3177 before experiencing a rebound above 1.3200.


It is important to note that the overall bias for the pair remains downward. However, if the USD/CAD manages to trade above the daily low of 1.3314 from May 8, it could potentially lead to a period of sideways movement. In such a scenario, the first level of resistance for the USD/CAD would be the 20-day Exponential Moving Average (EMA) at 1.3357, followed by the 200-day EMA at 1.3405.  Till we do not advise to buy USD/CAD.


Sell Scenario: -


On the contrary, if the USD/CAD drops below 1.3200, further downside is expected, with the pair likely to challenge the YTD low and potentially test the September 13 low at 1.2954.


It is worth noting that the Relative Strength Index (RSI) suggests that the pair is currently oversold, while the three-day Rate of Change (RoC) indicates a downward trajectory for the pair. Till we do not advise to sell USD/CAD.


Support and Resistance Level: -

 Support              Resistance  

 S1 1.3183   -     R1 1.3233

 S2 1.3156  -      R2 1.3256

 S3 1.3133  -      R3 1.3282


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