October 05, 2023 12:6 PM

Price of USD/CAD approaching 1.3800 as oil prices continue to decline and the US dollar strengthens

Price of USD/CAD approaching 1.3800 as oil prices continue to decline and the US dollar strengthens

In the European session, the USD/CAD pair is projected to extend its advance targeting the round-level resistance of 1.3800 after hitting a six-month high at 1.3785. The asset benefits from a strengthening US Dollar and further declines in the price of oil, Investors' concerns about the outlook for oil demand as a result of growing concerns about a global recession have kept the price of black gold in the negative zone.

It should be noted that Canada is the top oil exporter to the United States, and therefore falling oil prices have a negative effect on the value of the Canadian dollar.

Despite improving labor market conditions, the US Dollar Index (DXY) finds buyers' interest after correcting to close to 106.60. In September, the US ADP recorded 89K new private payrolls, virtually halving the 189K number from August. The strength of the future economic prognosis for the United States may be impacted by this.

The official labor market figures for the US and Canada, which will be released on Friday, are likely to influence currency movements.

After a long time of consolidation, USD/CAD shows a breakout of an inverted Head and Shoulder chart pattern that was produced on a daily scale. The high price of 1.3668 on April 28 served as the neckline of the aforementioned chart pattern. The bulls of the US dollar continue to have support from the 50-day Exponential Moving Average (EMA) at 1.3500. A horizontal resistance line is drawn from the peak on October 12, 2022, at 1.3978.

A bullish impulse has been activated as the Relative Strength Index (RSI) (14) moves into the positive area of 60.00–80.00.

The asset would be exposed to the March 10 high at 1.3860 and the round-level resistance at 1.3900 if there were a clear break above the March 24 high around 1.3800.

In a different scenario, the asset would be dragged toward the September 20 bottom near 1.3400 if a fall below the September 25 low of around 1.3450 occurred. If the asset continues to fall, it can reach a six-week low close to 1.3356.