Policy Uncertainty? USDCAD Under Pressure

Summary:

The US and Iran have agreed on a draft proposal to extend the current ceasefire by 60 days, which is likely to weaken the commodity-linked Canadian dollar and provide a boost to the USD/CAD currency pair.

BUY USDCAD

EXP

TRADING

1.38053

Entry Price

1.42000

1.36000

1.37880 +0.00045 +0.03%

0.0

Pips

Flat

1.36000

Exit Price

1.38053

Entry Price

1.42000

Fundamentals

The Bank of Canada noted that the actual impact of the current trade war on Canadian businesses is less severe than previously feared by the markets, primarily because most trade between Canada and the United States remains exempt from tariffs, and changes in US trade policy have not yet led to a long-term deterioration in financial conditions. However, the Bank of Canada warned that if the United States were to broaden the scope of its tariffs or further increase existing tariff rates in the future, Canada’s cross-border trade and overall economic activity would face more significant pressure. At the same time, the conflict in Iran has heightened global geopolitical uncertainty and driven up energy and commodity prices, further increasing risks to the global financial system.

Revised data released by the US Department of Commerce showed that US gross domestic product (GDP) grew by 1.6% on an annualised basis in the first quarter, down from the previously reported 2.0% and below market expectations. This downward revision primarily reflects weaker-than-initially-reported performance in inventory investment and consumer spending. US economic growth in the fourth quarter of last year stood at just 0.5%. Consumer spending, which accounts for more than two-thirds of the US economy, was revised down from 1.6% to 1.4%. However, large-scale tax rebates have to some extent alleviated the pressure on households caused by high oil prices.

Technical Analysis

Looking at the USD/CAD on the four-hour chart, the Bollinger Bands are beginning to widen upwards, the moving averages are diverging upwards, and the MACD fast and slow lines continue to trade above the zero line; the overall bullish trend remains intact. The RSI stands at 48, with market participants adopting a wait-and-see approach. On the daily chart, the Bollinger Bands are widening upwards and the moving averages are diverging upwards. Following a golden cross on the MACD, the fast and slow lines have returned above the zero line, suggesting a high probability of the price rising to 1.39. The RSI stands at 59, indicating a predominantly optimistic market sentiment. The recommended strategy is to buy on dips.

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Trading Recommendation

Trading Direction: Buy

Entry Price: 1.38

Target Price: 1.42

Stop-loss Price: 1.36

Support Levels: 1.35, 1.325, 1.28

Resistance Levels: 1.4, 1.41, 1.42

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Policy Uncertainty? USDCAD Under Pressure

Risk Disclosure