USD/CAD Breaks Key Support

On 25 June, we noted that the USD/CAD price had approached a crucial support level—the lower boundary of a converging triangle, which indicated a relative balance of supply and demand in the market during May.

Since then, the price has bounced twice from this level (as indicated by the arrow).

Today, as the USD/CAD chart shows, the exchange rate is breaking through this key support, indicating a disruption in balance.

This has been influenced by the weakness of the USD. According to Reuters, the US dollar has declined relative to other currencies due to weaker-than-expected US economic data released on Wednesday. These included a weak ISM Services PMI report and the ADP Non-Farm Employment Change report, which might suggest an economic slowdown.

How might the Canadian dollar's exchange rate change relative to the US dollar?

According to today's technical analysis of the USD/CAD chart:
→ the price is moving within a descending trend channel (shown in red). The median line of the channel may serve as a resistance level;
→ the fact that bulls attempted to push the price upwards, breaking the peak at Point 1, but failed—a bearish signal;
→ the sharp rise to Peak 2 was followed by an even sharper fall—a sign of bearish engulfing.

Therefore, the dominance of supply forces could lead to a continuation of the downward movement. It is not out of the question for the USD/CAD exchange rate to decline to the lower boundary of the red channel, with an attempt to break the May low around 1.359.

However, sharp movements are unlikely today due to the celebration of Independence Day in the USA.

Read analytical USD/CAD price forecasts for 2024 and beyond.