USD/CAD Lacks Momentum As Traders Wait For Additional Catalysts

Canadian Dollar Stays Range-Bound

USD/CAD continues to trade in the 1.2730 – 1.2760 range while the U.S. dollar is losing ground against a broad basket of currencies.

The U.S. Dollar Index is testing the support level at 96. If this test is successful, the U.S. Dollar Index will get to the test of the next support at the 50 EMA at 95.85, which will be bearish for USD/CAD.

Today, the U.S. reported that Manufacturing PMI increased from 55.5 in January to 57.5 in February compared to analyst consensus of 56. Services PMI improved from 51.2 to 56.7 compared to analyst consensus of 53.

Foreign exchange market traders also kept an eye on the developments in the U.S. government bond markets. Treasury yields have started to move higher despite rising geopolitical tensions as traders focused on inflation. At this point, rising yields failed to provide enough support to the American currency, but the situation may change quickly if the yield of 10-year Treasuries gets back above the 2.00% level and moves towards recent highs at 2.06%.

It should be noted that the gains of the Canadian dollar were limited as WTI oil moved towards the $92 level after an unsuccessful attempt to settle above $95. In case WTI oil settles back below $92, it will move towards the 20 EMA near the $90 level, which will be bearish for commodity-related currencies, including the Canadian dollar.

Technical Analysis

USD to CAD failed to settle below the support at 1.2730 and continued to trade in the 1.2730 – 1.2760 range. In case USD to CAD manages to settle above 1.2760, it will move towards the next resistance at 1.2780.

A move above the resistance at 1.2780 will push USD to CAD towards the resistance at 1.2800. If USD to CAD gets above this level, it will head towards the resistance at 1.2830.

On the support side, a move below 1.2730 will push USD to CAD towards the next support at the 20 EMA, which is located near 1.2715. If USD to CAD settles below this level, it will head towards the 50 EMA at 1.2695. A successful test of the support at 1.2695 will open the way to the test of the next support at 1.2680.

For a look at all of today’s economic events, check out our economic calendar.