USD/CAD has played out exactly as discussed in our last USD to CAD forecast. The pair has formed a bullish market structure that can send it above 1.40 in the next few weeks. The US inflation data and the oil price will be the major factors affecting the Canadian Dollar to US Dollar exchange rate in the near term.
Since the start of this week, Canadian Dollar has gained strength against US Dollar. On Wednesday, the pair turned green during the London session for the first time in the week. Till press time, it was trading at 1.36 after showing minor gains.
USD To CAD Gains From Rising Oil Prices
The ongoing pullback in USD/CAD is fueled by the falling DXY Index, which tracks the strength of the US Dollar in terms of major global currencies. The recent bank failures in the US have weakened the greenback in terms of its peers. Nonetheless, the surge in oil prices has increased the demand for global reserve currency once again.
On Wednesday, the DXY index increased by 0.15% on its first green day of the week. This also led to a weakness in Canadian Dollar to US Dollar exchange rate as the USD to CAD also showed minor gains. Our analysis shows that this may result in a much bigger bounce if the dollar strength index rebounds.
USD/CAD Breaks Out From The Bullish Pattern
The following chart shows that why my USD/CAD forecast is still bullish despite ongoing correction. The pair has broken out of the descending triangle pattern and currently retracing after closing a day above the 1.38 level. This breakout and the recent momentum can be taken as a sign of strength.
If the DXY index remains strong, then I expect the US Dollar to Canadian Dollar exchange rate to soar in the coming weeks. During this time, bulls can target the 1.38 level in the short term and the October highs of 1.398 in the mid-term.