The USDCAD currency pair last week set a new annual maximum just below the level of 1.39. Then, it went into a corrective decline. After two trading sessions, during which the bears actively sold the U.S. dollar, the quotes stabilized. The price reached the lower limit of the medium-term ascending channel, from which a rebound upwards is now developing. Movement from one limit of the channel to the other is accompanied by a changing news background.
Yesterday, the U.S. and Canada released trade balance statistics for September. The American deficit increased from 59.9 to 61.5 billion dollars. The data were slightly worse than expected. At the same time, Canada's trade balance turned positive for the second month in a row, exceeding 2 billion dollars and showed the maximum since July 2022. However, these statistics did not cause much excitement among traders, who continued to sell the Canadian currency.
Analysts pay attention to the structure of Canadian exports. The surplus for September is mainly due to the growth of oil prices and the active phase of wheat harvest. But by the current moment, oil has lost a significant part of achievements, and the harvest season is about to end. Turning to the more resilient components of exports, there is a decline in metals and minerals sales of more than 10%. So, the improvement in Canada's trade balance is temporary and will not be able to significantly support the national currency.
Additional pressure on the Canadian dollar is exerted by the results of a fresh survey of the country's financial regulator. According to the Bank of Canada, market participants expect the beginning of the interest rate reduction cycle as early as April 2024. In this case, Canada will be the first of the developed countries to ease monetary policy. Such a scenario provides a weak fundamental background for the Canadian dollar.
On the daily chart of USDCAD, the Stochastic indicator is turning upwards from the oversold zone and is giving a buy signal. The main growth target is the price return to the upper limit of the channel, and the level of 1.383 can be identified as an intermediate target.
The following trading strategy may be offered:
Buy USDCAD at the current price. Take profit – 1.383. Stop loss – 1.37.
This content is for informational purposes only and is not intended to be investing advice.
