USD/CAD holds steady near 1.3500, awaiting U.S. PCE and Canadian GDP data

On November 29, the USD/CAD pair continues to consolidate as a range-bound market, driven by a mixture of economic data from both the U.S. and Canada, as well as the fluctuating price of oil. As we approach key economic releases, the market could see increased volatility depending on the data's impact. The USD remains influenced by U.S. economic performance and the ongoing uncertainty around the Federal Reserve's policy stance, while the CAD is heavily impacted by global oil prices and the resilience of the Canadian economy.

U.S. Economic Data

The U.S. consumer confidence index for October came in at 102.6, near its highest levels in recent history, suggesting strong consumer sentiment. Additionally, weekly initial jobless claims were reported at 225,000, slightly lower than the expected 230,000, reinforcing the view of a robust labor market.

The revised third-quarter GDP growth for the U.S. showed a strong 3.1%, surpassing the 2.9% consensus forecast, which highlights continued economic expansion despite concerns over global economic slowdown. Meanwhile, the personal consumption expenditures (PCE) price index came in at 4.0%, slightly above expectations, which could fuel market speculation about the Federal Reserve tightening monetary policy further.

Canadian Economic Data

For Canada, oil prices continue to exert significant influence on the Canadian dollar. While WTI crude remains relatively stable around $78 per barrel, the lack of any clear breakout in oil prices limits the CAD’s upside potential. On the domestic front, Canada’s retail sales for October rose by 0.3%, slightly surpassing the forecasted 0.2%, indicating that consumer spending remains steady despite global economic uncertainties.

Canada’s third-quarter GDP growth came in at 0.5%, better than the expected 0.4%. While the growth rate is modest, it underscores the resilience of the Canadian economy, particularly in terms of exports and consumption. This is providing some support to the CAD amidst global market challenges.

Technical Analysis

From a technical perspective, USD/CAD remains range-bound, trading between 1.3450 and 1.3520. The price action remains choppy, with market participants awaiting the release of key data to provide direction.

• Support levels: 1.3450, 1.3400
• Resistance levels: 1.3520, 1.3550

Moving Averages (MA)

• The 5-day and 20-day simple moving averages (SMA) are currently around the 1.3500 level, indicating a neutral short-term market bias.
• The 50-day SMA and 200-day SMA are positioned at 1.3390 and 1.3180, respectively, with the price remaining above these longer-term moving averages. This suggests the overall market sentiment remains bullish, but a break below 1.3400 could trigger further downside.

Relative Strength Index (RSI):

• The RSI is currently at 47, indicating a neutral market. With the RSI hovering around the mid-40s, there is a balance of buying and selling pressures, meaning there is no clear momentum in either direction at this time.
• If the RSI moves above 50, it could signal increased buying pressure, while a dip below 30 would indicate an oversold condition, potentially leading to a rebound.

MACD (Moving Average Convergence Divergence):

• The MACD is hovering around the zero line, with the MACD line and the signal line close to each other, indicating a lack of clear trend direction.
• The MACD histogram is gradually decreasing, which suggests weakening bullish momentum. However, if the MACD line crosses above the signal line, it could signal a short-term buying opportunity.

Bollinger Bands:

• USD/CAD is trading near the middle band of the Bollinger Bands (around 1.3480), and the bands have been narrowing, suggesting reduced volatility in the market. If the price breaks above the upper band at 1.3520, there could be a move toward the next resistance at 1.3550. On the flip side, a drop below the lower band at 1.3400 would signal further bearish movement.

Fibonacci Retracement:

• Based on the recent rally from 1.3260 to 1.3660, the 0.618 Fibonacci retracement level comes in at 1.3440, which aligns with the support zone around 1.3450. If the price moves down toward this level, it could see a bounce back to the 1.3520 resistance. A break below this level would open up further downside potential toward 1.3400.

Summary

The USD/CAD pair continues to trade in a range, with the U.S. economy showing resilience through strong consumer confidence and GDP growth, while Canada’s modest third-quarter GDP growth and retail sales data offer some support to the Canadian dollar. Technically, USD/CAD remains stuck in a consolidation range, and the direction will likely depend on upcoming economic releases, particularly U.S. PCE data and Canadian unemployment figures. Key support levels are at 1.3450 and 1.3400, while resistance is at 1.3520 and 1.3550. Traders should watch for any breakouts from this range, as that could signal the next move in the pair.