Canadian Dollar Holds Steady Amid Negative Global Developments

The Canadian dollar displayed stability on Tuesday, with minimal fluctuations in both the United States dollar and crude oil prices. In recent weeks, the global economic landscape has been characterized by negative developments. These setbacks have been largely attributed to a continuous stream of adverse economic news from China. Despite its history of being a driving force in the global economy, China's economy has shown signs of sputtering, impacting investor confidence and prompting a shift towards safer assets such as the US dollar and US Treasury Bills. Consequently, the Canadian dollar, considered a riskier currency, has also faced challenges, approaching a two-and-a-half-month low against the US dollar.

Looking ahead, the Canadian dollar's performance is anticipated to be influenced by the release of retail sales figures and, more crucially, by a scheduled speech from Federal Reserve Chair Powell on Friday. Powell's remarks are expected to shape global sentiment and potentially impact the Canadian dollar's value against the US dollar. Traders are predicting a pause in rate hikes in the coming month.

In contrast, the US dollar displayed modest gains against a range of currencies, approaching a two-month peak reached the previous week. Additionally, the BRICS summit held in Johannesburg was monitored for potential news on Chinese stimulus.

China's President Xi Jinping reassured BRICS nations about the resilience of China's economy and its long-term growth prospects. However, recent concerns about China's economic slowdown have impacted riskier assets and caused US Treasury yields to rise.

Meanwhile, US existing home sales declined to a six-month low in July due to homeowners with favorable mortgage rates refraining from selling in a market characterized by high mortgage costs. This shortage of inventory led to higher home prices on a year-over-year basis. Due to the impact of aggressive interest rate hikes by the Federal Reserve, the housing market continues to grapple with limited inventory, potentially restraining a full rebound.

As a result, the outlook for the CAD against the USD suggests a stable trajectory in the near term, with a tendency towards modest gains for the CAD. While the USD might benefit from risk-averse sentiment and its safe-haven status, the CAD's resilience against the backdrop of stable commodity prices and a balanced interest rate environment should help maintain its competitiveness. This forecast indicates that any potential CAD strength might be tempered, keeping the exchange rate within a relatively constrained range.

Data for Technical Analysis (5H) CFD USD/CAD

Resistance : 1.3550, 1.3555, 1.3564

Support : .3534, 1.3529, 1.3520    

5H Outlook   

Source: Investing.com    

Buy/Long 1 If the support at the price range 1.3524 - 1.3534 is touched, but the support at 1.3534 cannot be broken, the TP may be set around 1.3550 and the SL around 1.3519, or up to the risk appetite.

Buy/Long 2 If the resistance can be broken at the price range of 1.3550 - 1.3560, TP may be set around 1.3568 and SL around 1.3529, or up to the risk appetite.       

Sell/Short 1 If the resistance at the price range 1.3550 - 1.3560 is touched, but the resistance 1.3550 cannot be broken, the TP may be set around 1.3528 and the SL around 1.3565, or up to the risk appetite.

Sell/Short 2 If the support can be broken at the price range of 1.3524 - 1.3534, TP may be set around 1.3510 and SL around 1.3555, or up to the risk appetite.       

Pivot Points Aug 23, 2023 02:27AM GMT

Sources: Finanz Nachrichten, Investing