Skip to content USDCAD is Overbought Amid Canadian Labor Weakens
In October, the Canadian dollar fell to around 1.366 per USD, marking its lowest point in eight weeks. This drop occurred as the outlook for foreign currency inflows became less promising while the U.S. dollar strengthened.
The daily chart below demonstrates the USD/CAD price, as well as the critical support and resistance levels.
USDCAD Fundamental Analysis – 9-October-2024
Canada’s trade deficit expanded significantly in August, reaching CAD 1.10 billion, compared to a revised CAD 0.29 billion in July. This gap exceeded the expected CAD 0.5 billion and is the largest since May.
The increase in the trade deficit was mainly due to a 1.0% reduction in exports. A key contributor was a 3.0% decline in energy exports, primarily crude oil, which dropped by 4.1%.
Energy Market Pressures Weigh on Exports
The drop in crude oil exports comes amid falling energy prices, putting extra pressure on this critical Canadian export. The lack of solid economic stimulus from China, the world’s largest energy importer, further pushed prices down, adding to the challenges for Canada’s energy sector.
Weak Labor Market Outlook Adds to Concerns
Upcoming labor data is anticipated to reveal more signs of weakness in Canada’s job market. This expectation has led many to believe the Bank of Canada might further ease its monetary policy to support the economy.
At the same time, the U.S. dollar has been strengthening, driven by expectations that the Federal Reserve might maintain a less dovish stance. Demand for safe-haven assets has also boosted the U.S. dollar, putting additional pressure on the Canadian dollar.
USDCAD Analysis – 9-October-2024
FxNews—The U.S. dollar trades in a robust uptrend against the Canadian dollar. The extreme buying pressure resulted in the USD/CAD becoming overbought, as the RSI 14 and Stochastic Oscillator hover above 70 and 80, respectively.
As the price approaches the 1.369 critical resistance, which coincides with the %50 Fibonacci retracement level, the anticipation of the pair entering a consolidation phase rises.
From a technical perspective, if the 1.369 resistance holds, a consolidation phase will likely emerge. Furthermore, if the USD/CAD price dips below 1.364, the consolidation phase can extend to 1.359.
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