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USD/CAD on Brink as Oil Prices and Dollar Index Shift

USD/CAD Oil Prices Dollar Index

USD/CAD teeters on the edge amid Oil Prices and Dollar Index fluctuations. Stay updated on critical shifts in the market.

The USD/CAD pair is experiencing downward momentum, spurred by the recent break of an ascending trendline. Despite facing technical challenges, A weaker US dollar and a rebound in oil prices caused the slide.

Oil prices, particularly WTI, exhibited a 1.9% increase ( at the time of writing), nearing $75 a barrel. This rise is unexpected, given ongoing uncertainties within OPEC+ regarding quotas for 2024, potential meeting delays, and the prospect of maintaining steady output and supply in 2024.

Notably, USD/CAD is subject to various risk events this week, distinguishing it from other currency pairs. Today, Federal Reserve policymakers conveyed a predominantly dovish stance, influencing market expectations with five basis points of anticipated rate cuts in 2024. Policymaker Waller emphasized the possibility of lowering the policy rate if inflation declines.

USD/CAD on Brink as Oil Prices and Dollar Index Shift

The Dollar Index (DXY) hit its lowest level since August, breaking a key support area, as US Yields, notably the two and 10-year, continued to decrease, contributing to subdued Dollar performance.

Looking ahead, the second estimate of Q3 US GDP on the horizon could impact volatility, depending on revisions from the initial estimate. More crucially for USD/CAD, Canadian GDP, and employment data later in the week, along with speeches from Federal Reserve Policymakers, could further shape price action.

Technical Analysis

USD/CAD recently broke a long-standing ascending trendline, providing an opportunity for a retest before a subsequent decline, bringing the pair close to the 100-day MA. A potential retracement might occur before resuming the downward movement toward the psychological level of 1.3500. If breached, support levels will be at 1.3450 and 1.3370.

In the event of an upward push, resistance is expected around 1.3640, followed by the 50-day MA at the 1.3680 level.

Key Levels Support

  • 1.3550
  • 1.3500
  • 1.3450

Resistance

  • 1.3640
  • 1.3680
  • 1.3720

IG Client Sentiment

IG client sentiment data reveals a balanced stance among retail traders, with 50% holding long and short positions. This data suggests potential retracement or caution before impending data releases.

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