Daily Analysis For USD/CAD  25-05-2023

Daily Analysis For USD/CAD 25-05-2023

USD/CAD Analysis
Key Points
• The USD/CAD pair has recently reached a three-week high but has been trading within a narrow range. It appears to be consolidating and preparing for a potential breakout above the 1.3600 level, as the US debt-ceiling issues have not been resolved.
• Despite the release of dovish interest rate guidance in the Federal Open Market Committee (FOMC) minutes, the US Dollar has continued its rally and remains unaffected by the news.
• Traders are flocking to the US Dollar as they seek safety amidst concerns surrounding the extension talks on the US debt ceiling. This risk aversion sentiment has contributed to the strength of the US Dollar.
• Amid cautious market conditions, the Loonie traders may find entertainment in risk catalysts and second-tier data releases, which could impact the Canadian Dollar's performance.

Today's Scenario: - The USD/CAD pair is experiencing fluctuations near its highest levels in three weeks, observed recently, as bullish sentiment pushes it towards the 1.3600 level in early Thursday trading. This upward movement is primarily driven by the overall strength of the US Dollar, while the impact of slightly higher WTI crude oil prices, Canada's major export, remains limited.
Simultaneously, the US Dollar Index (DXY) has reached a fresh seven-week high, reaching 104.00, due to concerns over a potential US default. The inability of US policymakers to reach an agreement on extending the debt ceiling, coupled with the upcoming long weekend for the House Representatives, has heightened fears of a US default. This situation has prompted major global rating agencies like Fitch and Moody's to exercise caution regarding the US credit rating status. Moody's recently issued a warning about the US outlook, while Fitch has placed the US' AAA rating on Rating Watch Negative status.

Diagram of USD/CAD
Economic Events and Scenario for USD/CAD
Economic Events : -
00:01(United Kingdom) Car Production YoYLowGBP
00:50(Japan) Foreign Bond InvestmentLowJPY
00:50(Japan) Stock Investment by ForeignersLowJPY
01:00(Australia) RBA Payments System Board MeetingLowAUD
04:35(Japan) 40-Year JGB AuctionLowJPY
07:00(Germany) GDP Growth Rate QoQMediumEUR
07:00(Germany) GDP Growth Rate YoYMediumEUR
07:00(Germany) GfK Consumer ConfidenceHighEUR
07:45(France) Business ConfidenceMediumEUR
07:45(France) Business Climate IndicatorLowEUR
08:00(Spain) PPI YoYLowEUR
09:30(Slovenia) Tourist Arrivals YoYLowEUR
09:30(Slovenia) Business ConfidenceLowEUR
10:00(Euro Area) ECB Annual Report 2022LowEUR
10:00(Euro Area) ECB Guindos SpeechHighEUR
10:10(Italy) BTP Short TermLowEUR
11:00(United Kingdom) CBI Distributive TradesMediumGBP
11:00(Latvia) Unemployment RateLowEUR
12:00(Canada) CFIB Business BarometerLowCAD
13:30(Canada) Manufacturing Sales MoMLowCAD
13:30(United States) Jobless Claims 4-week AverageHighUSD
13:30(United States) Continuing Jobless ClaimsHighUSD
13:30(United States) Initial Jobless ClaimsHighUSD
13:30(United States) Chicago Fed National Activity IndexMediumUSD
13:30(United States) Real Consumer Spending QoQLowUSD
13:30(United States) GDP Sales QoQLowUSD
13:30(United States) Core PCE Prices QoQLowUSD
13:30(United States) PCE Prices QoQLowUSD
13:30(United States) GDP Price Index QoQMediumUSD
13:30(United States) Corporate Profits QoQMediumUSD
13:30(United States) GDP Growth Rate QoQMediumUSD
13:30(Canada) Average Weekly Earnings YoYLowCAD
15:00(United States) Pending Home Sales YoYMediumUSD
15:00(United States) Pending Home Sales MoMMediumUSD
15:30(United States) EIA Natural Gas Stocks ChangeLowUSD
15:30(United States) Fed Collins SpeechMediumUSD
16:00(United States) Kansas Fed Composite IndexLowUSD
16:00(United States) Kansas Fed Manufacturing IndexLowUSD
16:30(United States) 8-Week Bill AuctionLowUSD
16:30(United States) 4-Week Bill AuctionLowUSD
17:30(United Kingdom) BoE Haskel SpeechLowGBP
18:00(United States) 7-Year Note AuctionLowUSD
23:00(New Zealand) ANZ Roy Morgan Consumer ConfidenceLowNZD

Buy Scenario: - In the event that USD/CAD surpasses the 1.3612 level, it is expected to advance towards the next resistance at 1.3635. If the resistance at 1.3675 is successfully tested, it would further propel the USD/CAD pair towards the 1.3745 level. Till we do not advise to buy USD/CAD.

Sell Scenario: - The USD/CAD pair experienced a rally driven by a widespread decline in commodity-related currencies, prompted by a significant sell-off in precious metals. The price of copper also reached multi-month lows, further contributing to the bearish sentiment surrounding currencies tied to commodities. Till we do not advise to sell USD/CAD.

Support and Resistance Level: -
S1 1.3525-R1 1.3635
S2 1.3456-R2 1.3675
S3 1.3415-R3 1.3745


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