Current trend

The USD/CAD pair has been adding in value since the end of last month, adjusting to a medium-term downtrend around 1.3491. The strengthening of the position of the US currency is taking place against the background of a change in investor sentiment: previously, most of them expected that the US Federal Reserve would start lowering interest rates in March, but economic statistics cast doubt on this scenario.

The economic recovery is again accompanied by an increase in inflation, which in December amounted to 3.4%, while the labor market remains strong: employment increased by 216.0 thousand instead of the expected 170.0 thousand, and wages increase remained at 4.1%. The volume of retail sales in December also accelerated the uptrend, amounting to 0.6% instead of the projected 0.4%. Thus, economic growth is again accompanied by an increase in consumer prices, which makes it impractical to reduce the cost of borrowing, as explicitly stated by the members of the regulator. The probability of shifting the start of the monetary policy correction from March to the H2 in the near future will continue to support the position of the US currency against its main competitors.

The Canadian economy, unlike the American one, is teetering on the brink of recession, while the risks of accelerating inflation in it are even higher: in December, the consumer price index was 3.4%, but average wages increased by 5.7%.

Support and resistance

Technically, the price is close to the 1.3549 mark (Murrey level [7/8]), the breakout of which will allow quotes to continue growing towards the targets of 1.3671 (Murrey level [8/8]), 1.3793 (Murrey level [ 1/8]), 1.3916 (Murrey level [ 2/8]). The key for the "bears" is the central line of Bollinger Bands at 1.3350, consolidation below which will lead to the resumption of the decline of the instrument to 1.3183 (Murrey level [4/8]).

Technical indicators confirm the likelihood of further growth:  Bollinger Bands are directed upwards, MACD is preparing to move into a positive zone, and Stochastic may leave the overbought zone in the near future, which does not exclude a corrective pullback, but its potential is limited.

Resistance levels: 1.3549, 1.3671, 1.3793, 1.3916.

Support levels: 1.3350, 1.3183.

Trading tips

Long positions can be opened above 1.3549 or after the price reversal around 1.3427 with targets at 1.3671, 1.3793, 1.3916 and stop-losses at 1.3470 and 1.3380, respectively. Implementation period: 5–7 days.