Daily Price Outlook
During the European trading session, the USD/CAD pair struggles to maintain its recent gains and drifts lower after reaching the 1.4275-1.4280 region, marking a one-and-a-half-week high.
It is currently trading around the 1.4240 level, down nearly 0.15% for the day, amid renewed selling pressure on the US Dollar (USD).
The Greenback remains under pressure following weak US economic data, which has reinforced expectations of further interest rate cuts by the Federal Reserve (Fed) this year.
Weaker US Economic Data Weighs on the USD
On the US front, the broad-based US dollar is struggling to recover despite an overnight rebound from its lowest level since December 10.
Recent data showed that US business activity contracted, with flash PMIs released last Friday indicating a decline to a 17-month low in February. This has fueled speculation that the Fed will adopt a more dovish stance, further pressuring the USD.
On the other hand, the Canadian Dollar (CAD) finds support from a recovery in Crude Oil prices, which had hit a fresh year-to-date low on Monday.
The commodity-linked CAD benefits from higher oil prices, as Canada is a major oil exporter. The recent bounce in oil prices has helped the Loonie gain strength, putting downward pressure on the USD/CAD pair.
Adding to the CAD’s strength, Canadian consumer inflation has shown a slight acceleration, reducing expectations of a rate cut by the Bank of Canada (BoC) at its upcoming policy meeting on March 12. This shift in market sentiment has further bolstered the Canadian currency.
Although, the CAD faces risks due to possible economic problems from Trump’s trade tariffs. On Monday, Trump confirmed that tariffs on Canadian and Mexican imports will start on March 4, as planned, despite efforts to delay them. If these tariffs happen, they could hurt Canada’s economy and slow down the CAD’s growth.
Market Focus on US Economic Data and FOMC Speeches
Moving ahead, Traders now turn their attention to the upcoming US economic reports, including the Conference Board’s Consumer Confidence Index and the Richmond Manufacturing Index.
In the meantime, the speeches from key Federal Open Market Committee (FOMC) members could provide further insights into the Fed’s monetary policy direction. Any dovish remarks may extend USD weakness, while a more hawkish stance could help the Greenback recover some ground.
USD/CAD – Technical Analysis
USD/CAD is trading at $1.42491, showing no significant change for the session as traders remain cautious ahead of key economic data.
The pair is currently hovering below the pivotal level of $1.42817, which serves as a critical threshold for short-term market sentiment.
A sustained move below this pivot keeps the bearish outlook intact, with immediate support at $1.42084. If bearish momentum strengthens, the next support is at $1.41515, followed by a deeper safety net at $1.40999.
On the upside, immediate resistance is seen at $1.43425. A break above this level could trigger a rally towards $1.43805, with the next target at $1.44416 if bullish momentum accelerates.
The 50 EMA is positioned at $1.42076, acting as dynamic support. The pair’s ability to stay above this moving average indicates underlying bullish pressure despite short-term hesitation.
The technical outlook suggests a cautious sell below the pivot point of $1.42820, with an entry at this level targeting $1.42085 and a stop loss at $1.43354.
This setup offers a favorable risk-reward ratio, aligning with the current bearish bias. However, traders should look for volume confirmation to validate the downward momentum before committing to short positions.
Conversely, a break above $1.42817 would flip the sentiment to bullish, potentially driving prices towards $1.43425 and beyond.
Given the market's sensitivity to economic indicators and geopolitical tensions, volatility is likely to persist. Traders should remain vigilant for any macroeconomic surprises that could impact USD/CAD’s trajectory.
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