USD CAD stalled below major resistance ahead of key data events

USD/CAD has continued to stall under major resistance around the 1.3400 area after having made a failed attempt last week at reaching towards September’s 11-year high of 1.3456. That attempt one week ago reached an intraday peak of 1.3334 before forming a “pin” bar, or shooting star candlestick pattern, that reversed its gains for that day and subsequent trading sessions.

Since mid-October, USD/CAD has been entrenched in a clear bullish trend, from the 1.2800-area support lows, that is well-defined by a relatively sharp uptrend support line. This medium-term uptrend lies within the context of a longer-term bullish trend going back at least to July of last year.

Both the recent and longstanding bullish momentum for the currency pair can be traced back to several different factors. Weighing on the Canadian dollar (and thereby helping to push up USD/CAD) has been a consistently dovish Bank of Canada that has cut its key interest rate twice this year. Also contributing in a correlated manner to pressuring the Canadian dollar has been persistent weakness in energy prices, particularly crude oil, with the West Texas Intermediate (WTI) benchmark for US crude not too far off from its multi-year lows due to ongoing oversupply issues.

Also contributing to USD/CAD’s ongoing rise, of course, has been the surging US dollar that has increasingly been fueled by progressively stronger prospects for an impending rate hike by the US Federal Reserve, with the majority of speculation now focused on a December hike.

Key data events this week that are very likely to make a major impact on USD/CAD include Friday’s Non-Farm Payrolls and Unemployment Rate reports coming out of the US, as well as a concentrated cluster of important Canadian data being released this week – including Canadian GDP on Tuesday, the Bank of Canada’s Rate Statement on Wednesday, and Friday’s Canadian Employment Change, Unemployment Rate, and Trade Balance. In addition, as always, the weekly US crude oil inventories on Wednesday should also affect the closely-correlated Canadian dollar.

With all of these vital data events this week, major technical price levels should also be well-heeded as potential trigger points. With any sustained pullback for the currency pair that breaks down below the noted uptrend support line going back to mid-October, the next major target immediately to the downside resides at the 1.3200 level, followed by the key 1.3000 psychological support level. To the upside, if USD/CAD manages to make a sustained rise above the noted September high of 1.3456, a new long-term high would confirm a continuation of the entrenched bullish trend and could then target further resistance around the 1.3600 level.