Current trend

The USD/CAD pair is still trading within the long-term ascending channel, but since last week it has been actively testing its lower limit.

Currently, the Canadian currency is strengthening its position against the background of the publication of May inflation data: instead of the expected decline, the consumer price index rose from 0.5% to 0.6% MoM and from 2.7% to 2.9% YoY. Thus, inflationary pressure has resumed growth, which significantly reduces the chances of a continuation of the cycle of interest rate cuts by the Canadian regulator. In early June, the Bank of Canada lowered the cost of borrowing from 5.00% to 4.75%, but now it is likely to pause the monetary policy easing at least until the autumn.

The latest economic statistics from the United States, on the contrary, confirms the possibility of interest rate cuts by the American regulator in the near future. In the first quarter, the economy slowed growth from 3.4% to 1.4%, while the May price index of private consumption expenditures decreased from 0.3% to 0.1% MoM and from 2.8% to 2.6% YoY. Thus, the rate of increase in gross domestic product (GDP) has significantly decreased, and inflationary pressure has declined, which satisfies the conditions of the US Federal Reserve for the start of rate cuts, which may happen as early as September. Maintaining the current monetary background may ensure a further decline in the USD/CAD pair in the medium term.

Support and resistance

Technically, the instrument is testing the 1.3671 mark (Murrey level [4/8]), consolidating below which will allow quotes to go beyond the ascending channel and continue to decline towards the targets of 1.3549 (Murrey level [2/8]), 1.3488 (Murrey level [1/8]). The key for the "bulls" is the level of 1.3732 (Murrey level [5/8]), after consolidation above which the growth of the trading instrument can resume to 1.3793 (Murrey level [6/8]), 1.3855 (Murrey level [7/8]).

Technical indicators do not give a clear signal: Bollinger Bands have moved horizontally after growth, MACD is at zero line, its volumes are insignificant, and Stochastic is reversing down.

Resistance levels: 1.3732, 1.3793, 1.3855.

Support levels: 1.3671, 1.3549.

Trading tips

Short positions should be opened below 1.3671 with the target of 1.3549 and stop-loss around 1.3715. Implementation period: 5–7 days.

Long positions can be opened above 1.3732 with targets of 1.3793, 1.3855 and stop-loss around 1.3690.