USD/CAD Price Analysis: Seeks strength to deliver a Falling Channel breakout
- USD/CAD is expected to perform lackluster ahead of Fed Powell’s speech.
- Significant gains will be added to the Loonie asset after a confident breakout of the Rising Channel.
- An oscillating in the bullish range by the RSI (14) favors upside bias.
The USD/CAD pair has turned sideways after a marginal correction from 1.3476 in the early Tokyo session. The Loonie asset is expected to resume its upside journey amid strength in the US Dollar Index (DXY) ahead of the speech from Federal Reserve (Fed) chair Jerome Powell for interest rate guidance. Also, Bank of Canada (BoC) Governor Tiff Macklem will provide commentary about further policy action.
S&P500 witnessed a steep fall on Monday on expectations that the Fed might consider more rate hikes amid fresh concerns after upbeat US Nonfarm Payrolls (NFP) data, portraying a sheer fall in investors’ risk appetite. The US Dollar Index (DXY) is expected to continue its three-day winning streak amid soaring hawkish Fed bets. Also, declining demand for US government bonds will keep yields solid.
Apart from that, investors will keep an eye on the movement of oil price as it has shown a sheer recovery move after dropping below $72.70, It is worth noting that Canada is a leading exporter of oil to the United States and higher oil price will support the Canadian Dollar.
USD/CAD is building strength to deliver a breakout of the Falling Channel chart pattern on a four-hour scale. The Loonie asset is expected to build an inventory accumulation as the US Dollar needs stellar buying interest for a confident breakout. A breakout of the chart pattern will be tested with a marginal correction around 1.3440.
The 10-period Exponential Moving Average (EMA) at 1.3435 will continue to act as major support for the US Dollar bulls.
Meanwhile, the Relative Strength Index (RSI) (14) is oscillating in a bullish range of 60.00-80.000, demonstrating an active upside momentum.
After a breakout of the Falling Channel chart pattern, testing of the breakout around 1.3440 could be an optimal buying opportunity, which will drive the asset towards January 19 high at 1.3521 followed by January 6 low at 1.3538.
In an alternative scenario, a confident downside break below Monday’s low around 1.3400 will drag the asset toward January 3 low at 1.3321. A slippage below the latter will drag the asset toward February 2 low at 1.3262.
USD/CAD four-hour chart
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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.
