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USD/CAD Dynamics: Awaiting Impact of Powell’s Speech Amidst Technical Bearish Signals

1 December 2023 Written by Anna Segal  Finance Industry Expert Anna Segal

The USD/CAD currency pair continues to exhibit a downward trajectory, potentially approaching the key psychological support level of 1.3500. During the European trading session on Friday, the pair hovered around 1.3530, reflecting the weakened U.S. Dollar's (USD) influence on the exchange rate. Concurrently, a rebound in West Texas Intermediate (WTI) crude oil prices is lending support to the Canadian Dollar (CAD), adding to the downward pressure on the USD/CAD pair.

The bearish momentum of the USD/CAD pair is corroborated by several technical indicators. The Moving Average Convergence Divergence (MACD), currently below the centerline, demonstrates a divergence beneath the signal line. This pattern is typically interpreted as a bearish signal for the currency pair.

Additionally, the 14-day Relative Strength Index (RSI) reading below 50 further reinforces a bearish sentiment in the market. This indicator suggests that the pair could approach its next support near the 1.3500 level, with a potential further slide towards the 1.3450 level if the downward momentum continues.

Key Resistance Levels Ahead

Conversely, on the upside, the USD/CAD pair faces a significant resistance level at 1.3550. Should the pair break above this level, the next immediate resistance is aligned with the seven-day Exponential Moving Average (EMA) at 1.3596, closely followed by the psychological barrier at 1.3600. A decisive breach above this latter level could pave the way for the pair to challenge the 23.6% Fibonacci retracement level situated at 1.3621.

In the event of a resurgence in the U.S. Dollar, perhaps influenced by forthcoming remarks from Federal Reserve Chair Jerome Powell, bullish momentum could be reignited in the USD/CAD pair. Such a scenario could see the pair targeting the significant resistance level at 1.3650. A successful ascent beyond this point could even lead the pair towards testing the weekly high at 1.3661.

As the currency markets await Federal Reserve Chair Jerome Powell's speech, the USD/CAD pair's immediate direction appears contingent on broader market reactions to U.S. monetary policy cues. In the short term, the pair remains susceptible to technical bearish signals, but the potential for a shift in sentiment, driven by macroeconomic factors or changes in oil prices, could significantly alter its trajectory.

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