USD/CAD gathers strength for a break above 1.3550 despite subdued USD Index

USD/CAD is building a base for a decisive break above 1.3550 despite downside bias for the US Dollar Index.
Higher interest rates by the BoC have heavily impacted on Canada’s retail demand.
The further downside in the oil price looks solid as global central banks are preparing for a fresh rate hike cycle.

Sagar Dua FXStreet

The USD/CAD pair has turned sideways after a stellar north-side move around 1.3550 in the early Asian session. The Loonie asset is expected to extend its recovery sharply above the immediate resistance of 1.3550. The strength in the Loonie asset looks enormous despite a subdued performance by the US Dollar Index (DXY).

S&P500 futures are showing some losses in Asia as investors are worried about forthcoming quarterly results from the United States corporate, portraying a decline in the risk appetite of the market participants. The US Dollar Index (DXY) has dropped below 101.70 and is declining towards the four-day support of 101.63, showing strength in the downside momentum. The demand for US government bonds is getting sluggish as one more rate hike from the Federal Reserve (Fed) is widely expected. The 10-year US Treasury yields have scaled to near 3.57%.

The USD index has failed to capitalize on the upbeat preliminary United States S&P PMI data, released on Friday. S&P Manufacturing data jumped to 50.4 from the consensus of 49.0 and the former release of 49.2. The figure landed above 50.0 for the first time in the past six months, indicating economic recovery amid pessimist circumstances of higher interest rates from the Fed and tight conditions by US banks for consumers and business-type loans.

The Canadian Dollar has faced immense pressure due to Canada’s weak retail demand. February’s Retail Sales report showed that monthly Retail Sales contracted by 0.2% vs. an expectation of 0.6% contraction. Retail Sales ex-auto data contracted by 0.7% against a contraction of 0.1% as expected by the market participants. This shows a sheer impact on retail demand due to higher interest rates by the Bank of Canada (BoC). BoC Governor Tiff Macklem is expected to keep rates steady at elevated levels to bring down stubborn inflation.

On the oil front, oil prices are showing a sideways auction above $77.00. Further downside looks solid as global central banks are preparing for a fresh rate hike cycle, which would heavily impact oil demand. It is worth noting that Canada is the leading exporter of oil to the United States and lower oil prices will impact the Canadian Dollar.

USD/CAD

Overview
Today last price	1.3536
Today Daily Change	-0.0004
Today Daily Change %	-0.03
Today daily open	1.354

Trends
Daily SMA20	1.348
Daily SMA50	1.3566
Daily SMA100	1.3529
Daily SMA200	1.3412

Levels
Previous Daily High	1.3563
Previous Daily Low	1.3473
Previous Weekly High	1.3563
Previous Weekly Low	1.3343
Previous Monthly High	1.3862
Previous Monthly Low	1.3508
Daily Fibonacci 38.2%	1.3529
Daily Fibonacci 61.8%	1.3507
Daily Pivot Point S1	1.3487
Daily Pivot Point S2	1.3435
Daily Pivot Point S3	1.3397
Daily Pivot Point R1	1.3578
Daily Pivot Point R2	1.3616
Daily Pivot Point R3	1.3668

Author

Sagar Dua

FXStreet

Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.

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