The USD/CAD pair has been trading higher for the first time this week, though economists at Scotiabank believe that its movement will remain lower. In fact, the technicals suggest that the downside pressure will likely continue.
The steady losses in the US dollar since Monday, along with the break under the 40-Day Moving Average (1.3592), have made support at that level an important price point to watch. Additionally, the bearish tilt in the intraday and daily trend intensity oscillators have kept the focus on the downside for USD/CAD in the short term.
While the USD has seen some modest gains on the day, they may have already peaked around 1.3565. Losses through the low 1.35s (with the 100-DMA at 1.3519) is likely to target a test of long-term trend support at 1.3410/15.
The USD/CAD pair has been under pressure for some time due to various economic conditions. One is the strength of the Canadian economy relative to that of the US. This puts demand on the loonie, pushing it higher.
If the Federal Reserve continues to raise interest rates, this could also put downward pressure on the USD/CAD pair. Higher interest rates make the dollar more attractive to investors, though this comes at the expense of other currencies like the loonie.
Another factor is the state of the oil industry, which has a significant impact on the Canadian economy. The price of oil has been fluctuating greatly over the past year, and this has led to a great deal of uncertainty in the Canadian economy.
Despite the downward pressure on the USD/CAD pair, the Canadian economy is still relatively strong, and economic indicators such as GDP have remained favorable. This has led some to believe that the loonie could continue to rise against the USD over the coming months.
In any case, traders looking to invest in the USD/CAD pair should closely monitor the technicals and pay attention to key price points. The break below the 40-Day Moving Average is one such point, and any further drops in the pair could result in a further decline towards the long-term trend support at 1.3410/15.
Additionally, traders should also keep an eye on economic developments in both the US and Canada. Any major announcements regarding interest rates or GDP could have a significant impact on the USD/CAD pair.
Overall, while the USD/CAD pair may be facing downward pressure in the short term, the medium- to long-term outlook for the Canadian economy is still bright. This means that traders should exercise caution when investing in this pair, but should also be prepared for potential upside movements in the loonie over the coming months.
