Today, the USD/CAD currency pair climbed above the 1.3787 level for the first time since late January.
- → Demand for the US dollar is being supported by concerns over escalating tensions in the Middle East. Market participants are favouring the USD as a safe-haven asset.
- → The Canadian dollar is under pressure due to domestic economic concerns. According to media reports, recent data point to weak GDP growth and a soft labour market. This increases the likelihood that the Bank of Canada will cut interest rates, while the Federal Reserve is expected to keep them unchanged.
Technical Analysis of USD/CAD
On 23 February, when the pair was trading around the 1.3700 level, we:
- → highlighted the ongoing long-term descending channel and the key support at 1.3500;
- → noted similarities with a rounding top pattern;
- → suggested a scenario in which bears might attempt to regain control and resume the longer-term downtrend.
Indeed, in the following sessions, USD/CAD showed signs of strong selling pressure, with the most pronounced move occurring on 9 March, when the pair dropped below 1.3530.
However, the onset of the Middle East conflict and other factors have significantly shifted market sentiment. The long-term descending channel has now been broken, suggesting that:
- → bulls have regained control of the market;
- → the pair may continue to develop within a newly formed ascending channel (shown in blue);
- → the 1.3700 level, which previously acted as resistance, may now serve as support going forward.
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