Baxia Markets
February 15, 2024

Breaking News: US Crude Oil Inventories Soar, Impacting USDCAD Dynamics!

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The USDCAD currency pair is currently experiencing a dynamic interplay of fundamental and technical factors, shaping its trajectory in the forex market.

Fundamentally, recent events have had a significant impact on the pair's movement. The release of US crude oil inventories yesterday exceeded forecasts by a substantial margin, with 12.018 million barrels versus the expected 3.300 million barrels. Given that Canada is one of the largest oil exporters to the US, higher US crude oil inventories could potentially influence CAD prices against the USD.
Moreover, the recent release of US Consumer Price Index (CPI) data, which surpassed forecasts, led to a spike in the value of the US dollar against the Canadian dollar. This bullish momentum has underscored the overall strength of the US dollar in the current market landscape.

Technically, the USDCAD pair is exhibiting intriguing patterns on the charts. A flag pattern has emerged following the recent bullish rally, indicating a potential short-term break or bullish correction before the pair resumes its upward trajectory. However, prolonged consolidation lasting over three trading days could signal a deeper retracement or even a bearish reversal. Confirmation of a bullish trend continuation would be provided by a break above the short-term descending trendline of the pullback.

On the hourly timeframe chart, technical indicators offer further insights into the pair's movement. The Exponential Moving Averages (EMA) 50 and 200 are both pointing upwards, indicating that the bullish momentum remains robust. However, the Bollinger Bands are showing a decrease in width, signaling decreasing volatility as market participants await key economic news releases, including US core retail sales, US initial jobless claims, and the Philadelphia FED manufacturing index. Mixed forecasts from economists on these releases add to the uncertainty surrounding market sentiment.

Key support levels to monitor include the EMA 200, as a break below this level may exert additional pressure on bullish positions. Additionally, indicators such as the Moving Average Convergence Divergence (MACD) and Relative Strength Index (RSI) are approaching bearish territory. The MACD's signal line is nearing a cross under the zero line, while the RSI is hovering around 45%, close to crossing under the 40% threshold. If both indicators breach these levels, it could intensify downward pressure on prices, potentially leading towards the EMA 200.

In conclusion, the USDCAD pair is influenced by a complex interplay of fundamental and technical factors. While bullish sentiment prevails, caution is warranted amid potential volatility surrounding upcoming economic news releases. Traders should closely monitor key support and resistance levels, as well as technical indicators, for insights into potential price movements.

Key Takeaways:

1. USDCAD is influenced by strong fundamental factors, including higher-than-expected US crude oil inventories and bullish US CPI data.
2. A flag pattern suggests a potential short-term break or bullish correction before a continuation of the uptrend.
3. Technical indicators like EMA 50 and 200 point to bullish momentum, while decreasing Bollinger Bands width indicates lower volatility ahead of key economic releases.
4. Key support lies at EMA 200, and a breach may add pressure on bullish positions.
5. MACD and RSI indicators nearing bearish territory suggest potential downward pressure on prices, especially if critical thresholds are breached.


Key Economic Releases to Watch Today

USD, Core Retail Sales (MoM)   

Forecast 0.2% vs Previous 0.4%

USD, Initial Jobless Claims

Forecast 219K vs Previous 218K

USD, Philadelphia Fed Manufacturing Index (Feb)

Forecast -8.0 vs Previous -10.6



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