This week, the USDCAD is bouncing off the lower boundary of the 3-month ascending channel. The main short-term target for the bulls is still to break the 1.361 resistance level from below. This was not possible in March, but sooner or later the pressure from buyers should bear fruit. If it does, it will open the way to 1.366 and the upper border of the channel.
The strengthening of the U.S. dollar against the currencies of other countries is supported by strong economic statistics. In addition, the demand for the US currency is growing due to expectations of a slow cycle of interest rate cuts. According to a report from the Commodity Futures Trading Commission (CFTC), traders increased their net long position in the US currency against other G10 currencies to $17.64 billion last week. This is the highest level since July 2022.
The Canadian Dollar has been feeling confident lately thanks to the rise in oil prices to six-month highs. However, the commodity market support for the Canadian currency may soon run out. The US Department of Energy has already announced the suspension of oil purchases for the Strategic Petroleum Reserve in anticipation of lower oil prices. This could be a signal for other oil market participants to take profits and close long positions. As a result, the Canadian Dollar will also come under pressure.
The Bank of Canada's new business survey continues to point to weakness in the country's economy. While the likelihood of a recession has decreased slightly, companies still expect low demand for their products throughout the year. Aaron Hurd, senior portfolio manager at State Street Global Advisors, points out that the US economy has significantly outperformed Canada. In this situation, the American currency is favored and there will be limited demand for the Canadian dollar.
The Stochastic indicator gives a buy signal, confirming the positive outlook for the USDCAD's growth. If the 1.361 level is breached, the upward movement may accelerate significantly, and the target will be the 1.366 level.
Consider the following trading strategy:
Buy USDCAD at the current price. Take profit 1 - 1.361. Take profit 2 - 1.366. Stop loss - 1.353.
This content is for informational purposes only and is not intended to be investing advice.
