USD/CAD Technical Analysis News

A Tough Week for the Loonie The Canadian dollar (CAD) has been under a lot of strain again. The USD/CAD hit around 1.4170 on Tuesday. This was the highest price for the CAD since Oct. 16. There were two main factors that led to the rise. First, the U.S. inflation data came in above what most expected. Second, crude oil prices have fallen. West Texas Intermediate (WTI) is now trading at approximately $84 per barrel, down more than 15 percent so far in November. Prior to the Federal Reserve and Bank of Canada meetings, we indicated that the difference in interest rates between these two countries would determine the direction of the USD/CAD. The Bank of Canada raised rates on 28 October. Even so, the Loonie lost ground. Reading the USD/CAD Chart The red candle represents a day where the U.S. Dollar closed higher than the Canadian Dollar. The grey candle represents a day where the U.S. Dollar closed lower than the Canadian Dollar. The gold line represents the 20-day average of the closing prices. The black line represents the 50-day average of the closing prices. There are two red dashed lines representing resistance levels of 1.4200 and 1.4298. There are also two dark dashed lines representing support levels of 1.4105 and 1.4000. Start by following the price action of the U.S. Dollar/Canadian Dollar currency pair starting on the left side of the chart. The price actions rise from approximately 1.39 in early September up to a maximum price of 1.4298 on October 9th. Following that high point, the price action falls back down to around 1.4090. After that, higher lows build above 1.4100. Tuesday's candle pushes toward 1.4200. Oil plays a big part, as our Brent crude outlook explains. The dotted arrows show two paths: a break toward 1.4298, or a slip back to 1.4090. Why Oil and Rates Matter Canada sells a lot of oil. When crude falls, export income falls too. That weighs on the Loonie. Rates matter as well. US inflation backed bets on another Federal Reserve hike in December. RBC economist Abbey Xu said the Bank of Canada faces an “uncomfortable balance” between weak growth and oil-driven inflation. Canada's soft job market adds doubt about a BoC hike in December. Our note on silver, $112 oil and Fed bets shows how oil feeds into rates. Three Scenarios A close higher than $1.4200 will allow the currency pair to reach its highest level since October at $1.4298. Lowering oil prices would be beneficial. Bearish: If we close at less than 1.4105 then 1.4000 is open. It can be triggered by oil prices going up or if US data is worse than expected. The short-term trend is upward as long as prices stay above 1.4105. A long-term forecast model indicates that if the Federal Reserve ceases to increase interest rates and the Bank of Canada begins to raise its own rates, then the price of the Canadian dollar will fall to 1.37 by late 2027. A Simple Trading Plan Oil is a fast-moving asset; therefore, patience is key. Before you act, allow for a daily close above/below a level. Set your stop-loss order outside of this area. When trading oil, only risk a tiny portion of your total account value (usually 1% or less). If oil experiences extreme volatility, simply step back and wait. What to Watch Next Jobs and inflation figures come from Statistics Canada. Watch them, along with the Fed and the BoC on 9 December. Other commodity currencies feel the same dollar pressure, as we saw in the rand's fight at 16.80. Trade small and put stops beyond the levels above. So is 1.4200 the next stop, or will oil bounce first? Mark the levels, watch crude, then tell us how you see it. Frequently Asked Questions Why is USD/CAD rising? Oil has fallen sharply, which hurts Canada's export income. US inflation also came in hot, which backs another Fed hike in December. Both help the US dollar. What is the key USD/CAD levels? Resistance sits at 1.4200 and 1.4298, the October high. Support sits at 1.4105 and the round 1.4000 level. What would send USD/CAD lower? A rebound in oil, softer US inflation or a clear hawkish message from the Bank of Canada. This is general information, not advice.

USD/CAD Technical Analysis: Loonie Slips Toward 1.4200

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