2023-04-24 • Updated
Oh, the poor Canadian Dollar. It's been underperforming against the US Dollar lately, extending its losses from last week. What's causing this unfortunate turn of events? Well, it's none other than crude oil - a key export of Canada. The black gold has been taking a beating lately, with WTI down almost 7 percent in recent times. This has been caused by fears of a global growth slowdown, as highlighted in the Federal Reserve's beige book. And as if that weren't enough, China's economy is also playing a role, with industrial production falling behind, which is more sensitive to the health of the global economy. It's no wonder USDCAD has been climbing higher recently, marking its best week since March. So, where is USDCAD headed in May? Let's see what the Price Action has to say.
Most things have stayed the same on the US Dollar chart since my initial article. The close of the previous candle on the weekly timeframe only added even further confirmation to the sentiment from last week. The basic confluences are; a rally-base-rally demand zone, trendline support, 100-Period Moving Average, and the alignment of the Moving Averages in a proper ascending manner.
Analysts’ Expectations:
Direction: Bullish
Target: 103.933
Invalidation: 99.629
Last week, I indicated a bullish intent on USDCAD based on the price action confluences I had seen, and true to the analysis, we ended the week with a bullish reaction from the rally-base-rally demand zone with the help of the other contributing factors; the trendline support, 50-Period Moving Average, and the Fibonacci retracement level. I believe this sentiment will play out for a while.
Analysts’ Expectations:
Direction: Bullish
Target: 1.38220
Invalidation: 1.31822
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The European Central Bank (ECB) has raised interest rates by 25 basis points, marking its tenth consecutive rate hike since July 2022 and bringing the total increase to 450 basis points. The ECB is primarily concerned about high inflation levels, both current and projected, with concerns extending into the future.
The upcoming August inflation data may send mixed signals. The 12-month headline inflation rate is expected to rise to 3.6%, causing concerns for the Biden administration. However, core inflation, which excludes food and energy prices, is projected to decrease to 4.3%, aligning with the Federal Reserve's goals. Past price trends influence both figures, so looking at recent data for a more accurate picture is crucial.
The odds of a final interest rate hike by the US Federal Reserve (Fed) this year have dropped after US job openings hit their lowest levels since early 2021. This has led to a correction in the US Dollar as traders reduced their bets on further rate hikes.
The past several weeks have been a real triumph for the bulls in the oil market. The Brent spot price grew by 8.5% during the last month.
Gold prices are rising for three consecutive days ahead of the Federal Reserve (Fed) interest rate decision, which is expected to remain unchanged due to declining inflation and a positive economic outlook. Investors are keen on the Fed's interest rate guidance, fearing a hawkish stance that could trigger market risk aversion.
Amid concerns of a Chinese economic slowdown, reports of declining investment often overlook China's efficient investment strategy in emerging sectors for long-term growth. China has taken measures to stabilize foreign and private sector investments, like reducing the reserve requirement ratio to boost investor confidence.
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