The USD/CAD currency pair continues to stand firm around the 1.3500 support level, with a strong recovery showcased after finding buying interest near 1.3520. Despite disappointing United States Durable Goods Orders data for July and weaker preliminary PMIs, the US Dollar has rebounded swiftly.
US Economic Resilience in Question
The US Census Bureau’s report indicated that Durable Goods Orders contracted by 5.2% in July, surpassing investors’ anticipation of a 4% contraction, a significant swing from June’s 4.4% expansion. This decline, coupled with S&P Global’s report of weaker preliminary PMIs for August, underscores concerns over the US economy’s robustness.
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, encapsulated these concerns: “A near-stalling of business activity in August raises doubts over the strength of US economic growth in the third quarter.”
Factors Fueling the USD’s Recovery
Investors’ focus now turns to the upcoming Jackson Hole Symposium, where Federal Reserve Chair Jerome Powell is expected to shed light on interest rates, inflation, and the broader economic outlook. Expectations that Powell will avoid further interest rate hikes are mirrored in the positive opening of the S&P500, as the labor market shows signs of waning resilience. The US Dollar Index continues its ascent, approaching the 104.00 mark.
Concurrently, the Canadian Dollar faces headwinds due to declining oil prices. Weak preliminary PMIs across Western nations have dimmed the oil demand outlook, affecting Canada, the leading exporter of oil to the United States.
Technical Analysis: Scotiabank’s Perspective
Despite Wednesday’s strong rejection of the 1.36 area for USD/CAD, economists at Scotiabank maintain a USD-bullish stance. Though the intraday chart reflects a bearish ‘shooting star’ candle on the six-hour chart, underlying dynamics remain in favor of the USD.
The USD is deemed overbought, but a more robust downward movement is needed to indicate elevated downside risks. Resistance levels are set at 1.3555/1.3565 and 1.3600/1.3610, while support remains at 1.3495/1.3505.
Conclusion
The USD/CAD pair’s dynamic interplay encapsulates broader economic uncertainties and market sentiments. With influential factors such as the Jackson Hole Symposium on the horizon and fluctuating commodity prices, traders and analysts must remain vigilant in interpreting these multifaceted cues. The technical outlook further adds complexity, highlighting the necessity for careful monitoring and strategic positioning in the face of current market volatility.
TRADE IDEA DETAILS
CURRENCY PAIR: USD/CAD
CURRENT TREND: Bullish
TRADE SIGNAL: Buy
👉ENTRY PRICE: 1.3520
✅TAKE PROFIT: 1.3600
❌STOP LOSS: 1.3490
ANALYSIS:
The current trend for the USD/CAD pair is bullish, supported by the USD’s rebound and Canadian Dollar’s pressure due to declining oil prices. The support level of 1.3500 has proven strong, and the trend oscillators indicate a USD-bullish sentiment.
TRADE PLAN:
Enter the trade at approximately 1.3520, just above the support level. Target a take profit at 1.3600, aligning with the next significant resistance. A stop loss is set at 1.3490, just below support, minimizing potential loss. Monitoring should occur on a 6-hour chart, considering recent intraday behaviors.
FINAL THOUGHTS:
This trade capitalizes on current bullish trends in the USD and pressures on the CAD due to oil price dynamics. The Jackson Hole Symposium and subsequent economic announcements should be closely monitored, as they may significantly impact the currency pair’s movement. Attention to the overbought signals and resistance levels will be key to successful trading within this setup.