The USD/CAD pair is under pressure, trading in negative territory near 1.4350 during the early European session on Tuesday. A recovery in crude oil prices is bolstering the Canadian Dollar (CAD), which is tied to commodities, creating headwinds for the USD/CAD pair. However, the downside may remain limited due to growing expectations that the Federal Reserve (Fed) will slow its pace of interest rate cuts in 2025. With the New Year holiday around the corner, market activity is expected to remain subdued.
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USD/CAD Daily Chart Signals a Constructive Outlook
From a technical perspective, USD/CAD retains a constructive outlook on the daily chart as the pair continues to trade above the critical 100-period Exponential Moving Average (EMA). This trend is further supported by the 14-day Relative Strength Index (RSI), which is positioned above the midline at 63.50, indicating bullish momentum.
Key Resistance Levels to Watch
- Immediate Resistance at 1.4450: The first major hurdle for USD/CAD is the 1.4450 level, which corresponds to the high recorded on December 27. A sustained move above this level could trigger further upside.
- Next Target at 1.4517: A breakout above 1.4450 could lead to a rally toward 1.4517, the upper boundary of the Bollinger Band.
- Major Resistance at 1.4668: Further gains might target 1.4668, the high from March 16, 2020, serving as a significant long-term resistance level.
Key Support Levels to Monitor
- Initial Support at 1.4210-1.4200: On the downside, the first level of support lies between 1.4210 and 1.4200, aligning with the December 13 low and a key psychological level.
- Deeper Support at 1.4042: A break below the initial support zone could expose the pair to the lower boundary of the Bollinger Band, located at 1.4042.
- Critical Support at 1.3955: Further declines could test 1.3955, which aligns with the 100-day EMA and represents a crucial support filter.
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Outlook for USD/CAD Ahead of the New Year
While the recovery in crude oil prices is adding strength to the Canadian Dollar, the technical indicators suggest that USD/CAD retains a bullish bias in the short term. Traders should closely monitor the key resistance and support levels as the pair consolidates around 1.4350. With low market activity expected ahead of the New Year, any significant price moves might be limited until 2025 trading kicks off.
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