USD/CAD is currently rangebound, causing frustration among traders due to various factors such as rate differentials and rising oil prices. The Canadian PMI data has been weaker than expected, showing decreased output, new orders, and employment. However, the Canadian dollar has been supported by stronger oil prices in recent times.
Technical analysis of USD/CAD reveals a wedge pattern, indicating the potential for a significant breakout once it occurs. The ongoing tug of war between bulls and bears in the market has kept the currency pair within a 250-pip range over the past three months.
The Bank of Canada (BoC) has taken a lead in monetary policy by implementing a rate cut, contrasting with the U.S. Federal Reserve’s more conservative approach. Recent inflation data in Canada shows an uptick, which may impact future rate decisions by the BoC.
The relationship between USD/CAD and WTI oil prices is also significant, with movements in oil prices influencing the currency pair. Despite a recent rally in oil prices, USD/CAD has not responded significantly, possibly due to anticipated rate differentials in the future.
In terms of data releases, both the U.S. and Canada have seen mixed signals, with market participants maintaining rate cut bets for September. Canadian PMI data has been softer than expected, with concerns about weak demand and pricing power.
Looking ahead, high-impact data releases are expected later in the week, with the U.S. NFP report and Canadian unemployment data on Friday. Technical analysis of USD/CAD suggests a potential explosive breakout once the wedge pattern is resolved, highlighting the importance of monitoring price action in the coming days. As the USD/CAD prices continue to trade within a wedge pattern, a breakout is expected to occur soon. This breakout could potentially lead to a rally of around 200 pips in the direction of the breakout.
In the meantime, there are opportunities for rangebound trading, with key support and resistance levels to monitor closely on the USD/CAD daily chart dated July 2, 2024.
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