The USD/CAD pair established itself above the significant resistance level of 1.3700 during Thursday's Asian session, signaling a bullish momentum as the US Dollar strengthens. The pair is currently aiming to recapture the weekly high near 1.3740, driven by robust demand for the US Dollar. This demand surge stems from a sharp decline in traders' expectations for the Federal Reserve (Fed) to reduce interest rates in the upcoming September meeting.
Investors are now keenly awaiting the United States core Personal Consumption Expenditure (PCE) Price Index data for April, which is expected to significantly influence speculation about Fed rate cuts in September. Today's economic calendar is packed with high-impact news primarily from the US, with market participants focusing on the US GDP growth, Goods Trade Balance, and Core PCE data. Economists forecast a slowdown in GDP to 1.6% and a lower Goods Trade Balance at -$91.90 billion. However, expectations for the Core PCE are higher, forecasted at 3.7%. These economic indicators will provide crucial insights for investors and traders to gauge the Fed's potential actions regarding interest rate adjustments in September.
On the Canadian Dollar front, investors are anticipating the release of Gross Domestic Product (GDP) data for various timeframes on Friday. On a month-to-month basis, the Canadian economy is projected to have remained stagnant after expanding by 0.2% in February. For the first quarter of the year, the economy is expected to have grown by 2.2% on an annualized basis. Weak GDP numbers could increase the likelihood of the Bank of Canada (BoC) reducing interest rates starting from the June meeting.
Technically, the USD/CAD pair is displaying bullish behavior on the 1-hour timeframe chart. Prices are currently nearing the key resistance level at the highest point of a bearish engulfing candlestick at 1.3737, highlighted in a blue rectangle. Key support is identified at 1.3648, approximately 70 pips below the current price.
The Exponential Moving Averages (EMA) also support a bullish sentiment in the medium to long term, with the EMA 50 positioned above the EMA 200. Similarly, the Ichimoku indicator reinforces this sentiment, as the price, Tenkan-sen, Kijun-sen, and Chikou Span are all above the cloud.
Oscillator indicators add further insights into the market conditions. The Relative Strength Index (RSI) is in the overbought zone, confirming that the key resistance level is close, assumed to be at 1.3737. As the market has reached the overbought zone and then retreated, prices are currently experiencing a pullback. The Moving Average Convergence Divergence (MACD) also indicates a bullish pullback, with both the histogram and signal line above the zero line, although the histogram is currently below the signal line.
Today's key economic news presents an opportunity for the market to gain momentum and potentially break the key resistance level, continuing its bullish trend if the US data meets or exceeds forecasts. Conversely, if the data results are mixed, prices may test the EMA 200 and the key support level at 1.3648, searching for renewed buyer interest.
Overall, the USD/CAD pair's current positioning and upcoming economic data releases will be crucial in determining the next directional move in the market. Investors and traders are advised to stay vigilant and closely monitor these developments.
Forecast -91.90B vs Previous -91.54B
Forecast 3.70% vs Previous 2.00%
Forecast 1.6% vs Previous 3.4%
Forecast 218K vs Previous 215K
Forecast -5.5B vs Previous -1.6B
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