- The USD/CAD pair remains volatile but overall bullish, holding above the 1.40 level and the 50-day EMA.
- Despite softer U.S. CPI data, the weaker Canadian economy supports continued U.S. dollar strength toward 1.4250, with buyers favoring pullbacks.
The U.S. dollar initially rallied against the Canadian dollar during trading on Friday but experienced noisy behavior after testing the 1.40 level multiple times over recent sessions. There continues to be hesitation above that area, which makes sense given that the market is attempting to break out and push higher over the longer term. That being said, it’s a bit of a job for the US dollar at the moment.
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If the pair can break above the top of the shooting star from the Thursday session, it could open the door to a move toward the 1.4250 level. Technical analysis has remained somewhat bullish over the past few weeks, and with the price trading above the 50-day EMA, the broader trend still favors the upside.
That said, volatility is likely to persist. Despite cooler-than-expected CPI numbers in the United States on Friday, the Canadian economy appears to be struggling. Under these conditions, short-term pullbacks may present value-buying opportunities as long as the pair stays above the 50-day EMA.
On a Break Below the 50-day EMA
If a breakdown occurs below that moving average, the market could target the 1.38 level, where the next key support lies. Ultimately, the U.S. dollar remains more attractive than the Canadian dollar, supported by favorable swap rates that reward holding dollars over Canadian dollars. This is a market that I remain bullish about, but it is a matter of finding momentum to get this going higher. Long-term momentum continues to favor the US dollar, but it probably takes something external to get buyers excited again.
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