USD/CAD is facing a strong resistance

29 May 2023 136
USD/CAD is facing a strong resistance

USD/CAD is facing a strong resistance. The market continues to respond to the situation around the U.S. national debt.

 

On Sunday, U.S. President Joe Biden and House Speaker Kevin McCarthy came to an agreement on the debt ceiling. It is set to stay at $31.4 trillion until January 1, 2025. The agreement is ready to go to Congress for a vote, the president said. If approved, it will prevent default in the U.S.

 

The discussion regarding the national debt ceiling has sparked debate among Democrats and Republicans, but politicians expect to get enough votes from both sides.

The new agreement would limit budgets for 2024/2025, accelerate the approval of some energy projects, and increase spending on security.

 

The dollar index has been showing steady growth for three weeks. It becomes obvious that the compromise between the White House and the Congress on the debt ceiling will be achieved. As traders say, «buy on rumor, sell on fact», so the dollar index may change its direction as early as this week.

 

This week's macroeconomic data indicates a drop in USD/CAD. The Canadian government will release its GDP data on Wednesday, so the index is expected to grow up to 2.8% per annum. The non-farm payrolls indicator is likely to decline to 180K on Friday, which weighs on the U.S. dollar.

Today is a day off in the U.S., so the currency pair pricing will be influenced by technical indicators.

 

USD/CAD is now in the uptrend of the H4 timeframe. Having failed to reach the main resistance at 1.3667, the pair reversed towards the trend support. The Relative Strength Index (standard values) shows a divergence, which gives a signal of a trend reversal. There is a possibility that the price will reach the uptrend limits.

 

Signal:

USD/CAD short-term outlook is to buy.

The target is at the level of 1,3465.

Take profit could be placed near the level of 1,3550

A stop-loss could be placed at the level of 1,3685.

The bearish trend is short-term, so trading volume should be no more than 2% of your balance.

This content is for informational purposes only and is not intended to be investing advice.

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