The USD/CAD exchange rate continues to defend its rally following the U.S. election, with the potential to test the November high of 1.4178. However, technical indicators suggest mixed signals, as the Relative Strength Index (RSI) shows divergence with price movements, failing to enter overbought territory despite the recent climb.
Technical Analysis: Eyeing Key Resistance Levels
USD/CAD briefly surpassed the May 2020 high of 1.4173 amid tariff threats from President-elect Donald Trump targeting Canada. The pair remains positioned to extend its upward trend, supported by a positively sloping 50-Day Simple Moving Average (SMA) at 1.3826.
Should the pair advance further, the RSI may approach overbought levels, signaling a continuation of bullish momentum. However, if the RSI fails to break above 70, it could indicate waning momentum. A decisive break above the November high of 1.4178 would bring the next resistance level at 1.4210 (78.6% Fibonacci extension) into focus, with potential upside toward the April 2020 high of 1.4299.
Conversely, failure to sustain the rally above the 1.3970 to 1.4000 zone (61.8% Fibonacci extension) may prompt a pullback, with support likely around the 1.3900 mark and the November low near 1.3821 providing further downside targets.
Upcoming US Data and Market Impact
The U.S. Non-Farm Payrolls (NFP) report is a key event on the horizon, with expectations of 195,000 jobs added in November compared to the 12,000 increase in October. A robust labor market report could bolster the U.S. dollar by dampening expectations of further Federal Reserve rate cuts. However, a weaker-than-expected outcome could pressure USD/CAD as markets adjust to the prospect of more accommodative monetary policy heading into 2025.
Consolidation Ahead of Breakout?
Until clearer economic signals emerge, USD/CAD may remain range-bound, consolidating within the November range. A lack of sustained momentum above the 1.4040 to 1.4080 zone (key Fibonacci levels) may cap further gains for now. Traders will closely monitor technical levels and upcoming data releases to assess the pair’s next move.
Broader Market Outlooks
- USD/JPY: Retreats after its post-election rally, testing support levels.
- GBP/USD: Remains under pressure, with risks of revisiting May lows.
- NZD/USD: Rebounds from 2023 lows as the RBNZ considers rate cuts.
- Gold Prices: Posts a five-day rally, its first since March, signaling renewed interest in safe-haven assets.
As USD/CAD navigates these pivotal levels, the interplay of technical indicators and macroeconomic data will be crucial in determining its trajectory in the weeks ahead.
