USD/CAD Forex Technical Analysis – Pressured by Demand for Riskier Assets

The Canadian Dollar is outperforming its U.S. counter-part on Monday on the back of a stronger Euro and firming commodity prices. The Loonie is also being lifted by a surge in the commodity-linked Australian and New Zealand Dollars. Profit-taking and position-squaring ahead of Tuesday’s U.S. consumer inflation report (CPI) is also driving the U.S. Dollar lower against a basket of major currencies.

At 10:22 GMT, the USD/CAD is trading 1.2992, down 0.0028 or -0.22%. On Friday, the Invesco CurrencyShares Canadian Dollar Trust ETF (FXC) settled at $75.09, up $0.45 or +0.60%.

The weaker U.S. Dollar is helping to drive demand for dollar-denominated gold and crude oil. Since Canada has a commodity-based economy, rising gold and crude oil prices tend to be supportive for its currency.

In Europe, the ECB sees a rising risk that they will have to raise their key interest rate to 2% or more to curb record inflation in the Euro Zone, sources told Reuters.

In the U.S., investors are wary ahead of Tuesday’s U.S. CPI report, even as Fed officials continued their hawkish rhetoric on Friday, the final day for such comments before a black-out period leading up to the Federal Open Market Committee’s (FOMC) deliberations on September 20-21.

Early Monday, the CME’s FedWatch Tool indicates that financial market traders have increased the chances of a 75 basis-point rate hike by the Fed to 90%.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart. However, momentum has been trending lower since the September 7 closing price reversal top.

The minor trend is down. This confirmed the shift in momentum.

The short-term range is 1.2895 to 1.3209. The USD/JPY is currently trading on the weak side of its 50% level at 1.3052, making it resistance.

The intermediate range is 1.2728 to 1.3209. Its retracement zone at 1.2969 to 1.2912 is potential support.

The main range is 1.2518 to 1.3224. If the main trend changes to down then its retracement zone at 1.2871 to 1.2788 will become the next target.

Daily Swing Chart Technical Forecast

Trader reaction to the intermediate pivot at 1.2969 is likely to determine the direction of the USD/CAD on Monday.

Bullish Scenario

A sustained move over 1.2969 will indicate the presence of buyers. If this creates enough upside momentum then look for a retest of the short-term pivot at 1.3052.

Bearish Scenario

A sustained move under 1.2969 will signal the presence of sellers. This could trigger a sharp break into the intermediate Fibonacci level at 1.2912. This is the last potential support before the 1.2895 main bottom.

Taking out 1.2895 will change the main trend to down with 1.2871 to 1.2788 the primary downside target.