CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
☰
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
✖

Canadian Dollar Analysis: USD/CAD Tests 1-Year Highs After Strong US GDP

Article By: ,  Head of Market Research
October 27, 2023 2:33 PM

USD/CAD Key Points

  • Another run of strong US data boosted the US dollar, while the Canadian dollar is struggling amidst falling oil prices.
  • USD/CAD is testing 1-year highs in the mid-1.38800s.
  • A bullish breakout here could expose the 2.5-year high at 1.3975 next.

USD/CAD Fundamental Analysis

It was another day, another run of strong US data yesterday.

Yesterday morning’s US economic reports were almost unanimously stronger than anticipated, highlighted by 4.9% q/q annualized growth in Q3 GDP, an unexpected 0.5% m/m rise in Durable Goods Orders, and a 1.1% m/m uptick in Pending Home Sales.

Source: StoneX

Not surprisingly given the strong data, the US dollar was the strongest major currency on the day. Meanwhile, the Canadian dollar saw little in the way of economic releases, but another round of selling in oil, Canada’s most important export, pushed the loonie to the bottom of the relative strength tables.

Traders are increasingly skeptical that we’ll see another interest rate hike out of the Federal Reserve this cycle, but they’ve essentially priced out any more increases from the Bank of Canada entirely; Whether this flicker of hope for a widening interest rate spread between the US and Canada grows or gets snuffed out will be a key driver of how USD/CAD trades over the rest of the year.

Canadian Dollar Technical Analysis – USD/CAD Daily Chart

Source: TradingView, StoneX

As the chart above shows, USD/CAD has rallied each of the first four days so far this week to trade above 1.3800, essentially the pair’s highest level since last October. For now, there is a potential bearish divergence with the 14-day RSI that could hint at a near-term top around previous resistance in the 1.3850 level, but a strong bullish break above that area would likely erase the divergence.

A move above 1.3850 could expose the 2.5-year high around 1.3975 next, whereas a bearish reversal could take rates down toward the mid-1.3700s without interrupting the medium-term bullish trend.

-- Written by Matt Weller, Global Head of Research

Follow Matt on Twitter: @MWellerFX

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.

© City Index 2024