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The US dollar has had a breakout week against the Canadian dollar after finding solid buying interest due to fundamentals effecting mainly the Canadian dollar.
West Texas Intermediate oil rallied after the American Petroleum Institute’s weekly crude stock data showed inventories fell 6.0 million barrels last week.
Also, the latest minutes of the Bank of Canada revealed discussions about hiking rates in April or indeed whether to remain waiting for more economic evidence.
However, the Governing Council noted that inflation was declining, aligned with the BoC’s forecasts. Moreover, it signalled that no rate cuts are expected in 2023, and the bank will act if higher rates are needed.
The BoC opted to shift its priority and support growth, and this is also an interesting divergence as the Fed makes the priority inflation get lowered.
Going forward, if this divergence between USA and Canadian central banks remains, we are likely to see more USDCAD upside. The only potential issue could be higher oil prices boosting the Lonnie.
Very high levels of bearish sentiment are still being seen towards the USDCAD pair, with some 84 percent of traders currently holding a negative view towards the USDCAD pair.
With the strong bearish sentiment bias hints that more upsides could happen as retail are typically on the wrong side of the trade.
USDCAD Short-Term Technical Analysis
The USDCAD pair has activated a large, inverted head and shoulders pattern, and the neckline of the head and shoulders pattern is found around 1.3450 level.
The pattern has not already met its target, heightening the chances of higher prices. According to technical analysis we could be close to an explosion towards 1.3800.
USDCAD Medium-Term Technical Analysis
The USDCAD pair has recently found strong technical support and is strong rally from the very bottom of its price range.
It should be noted that the price is in the Ichimoku cloud, however, the lagging line is generating a strong buy signal right now. The top of the cloud is found around 1.3700.
