Comprehensive USD/CAD Analysis for December 27, 2023

USD/CAD Key Takeaways

• Canadian Gross Domestic Product: Canada’s GDP for October came in flat at 0%, falling short of expectation for a rise of 0.2%.
• US Core PCE Price Index: Fed preferred Core PCE Price Index rose by 0.1% monthly and 3.2% annually. The data shows diminishing inflation pressure which may prompt an early rate cut.
• Geopolitical tension in the Middle East: Recent attack on cargo ship in the Red Sea spur speculation on possible oil supply disruption, lending support for the commodity-backed currency.

USD/CAD Fundamental Analysis

Greenback took a hit during holiday season trading, pinned down by bearish economic data. From the Canadian end, its latest Gross Domestic Product for the month of October came in flat at 0%, falling short of expectation for a rise of 0.2%. However, the blow on Canadian dollar was soften after US latest inflation data fell short, solidifying market’s bearish expectation towards the Feds.

In November, the Core PCE Price Index (Fed preferred inflation data) rose by 0.1% while its annual rate ticked up to 3.2%. The data is well below market expectation for a rise of 0.2% and 3.3% respectively. Recent signs of diminishing inflationary pressure in the US may bring up discussion on the need to keep interest at high level for longer period. This has also sparked expectation that the Federal Reserve may cut its interest rates sooner to reach a balance in between economic progression and healthy inflation levels.

Consequently, Canadian dollar received a bump in market demand during early trading hours due to rising tension in the Middle East. Oil prices jumped more than 2%, hitting its highest level in a month following attacks on cargo ships in the Red Sea. Rising geopolitical tension in the region sparked speculation of possible disruption in oil supply, thus lending support for the commodity and Canadian dollar (Canada is a major oil exporting country).

USD/CAD Technical Analysis

USD/CAD Daily Chart Insight

• Price action: USD/CAD fell through previous stronghold at 1.3370, which opens ample space for further downside. Currently, it is approaching the next stronghold around 1.3147 that may possibly stall its current descend around the area in the region. Be on the lookout for a short-term extension in bearishness prior to technical corrections.

• MACD Histogram: The indicator currently displays persistent bearish signal, with momentum geared towards the downside. We may expect possible extension in downtrend, with the first target at around 1.3147.

USD/CAD 1 Hour Chart Insight

• Price Action: USD/CAD continues in a downward channel, with its current price hovering at the bottom. We may expect an extension in the current trend, due to the recent price action at the bottom which shows a probable uptick in buying power.

• MACD Histogram: The Indicator shows the formation of bullish signal, coupled with diminishing bearish momentum. Be on the lookout for a short upside retracement ahead.

Bottom Line