On Friday, December 27th, before the European market opened, the USD/CAD is currently fluctuating around 1.4410. Recently, the USDCAD exchange rate has become flat after a continuous rise, and the Canadian dollar has benefited from the rebound in crude oil prices, slightly recovering some lost ground. Due to the fact that the United States is the largest importer of Canadian crude oil, fluctuations in crude oil prices directly affect the performance of the Canadian dollar.

The recovery of the crude oil market supports the Canadian dollar

The price of West Texas Intermediate (WTI) crude oil is currently trading at around $69.80 per barrel. The recent slight rebound in crude oil prices is due to major European energy companies gradually shifting their focus from renewable energy to crude oil and natural gas in pursuit of short-term profits. According to market analysis, this trend may continue until 2025, further supporting the performance of crude oil prices.

The Canadian economy is facing downward pressure

The weak domestic economic data in Canada has become the main obstacle to the rebound of the Canadian dollar. In November, Canada's GDP is expected to shrink by 0.1% month on month, marking the first monthly decline this year. This data reflects the Bank of Canada's recent concerns about the economic growth outlook, and is consistent with the government's downward adjustment of economic growth expectations. Specifically, the Canadian government has lowered its GDP growth forecast for 2025 from 1.9% to 1.7%, and for 2026 from 2.2% to 2.1%.

Due to the increasing pressure of economic slowdown, the market expects that the Bank of Canada may further relax monetary policy to support economic growth. This expectation not only weakens the attractiveness of the Canadian dollar, but may also widen the gap with the Federal Reserve's interest rate policy, thereby increasing the advantage of the US dollar over the Canadian dollar.

The US dollar benefits from the Federal Reserve's monetary policy adjustment

On the other hand, the US dollar benefits from the relatively tough stance of the Federal Reserve's policies. At the December meeting, although the Federal Reserve cut interest rates by 25 basis points, it lowered its expectations for rate cuts in 2025 from four to two. This adjustment reduced market expectations for future interest rate cuts by the Federal Reserve, thereby supporting the performance of the US dollar.

At present, the US dollar index remains above 108.00, close to the highest level since November 2022. However, the yield of the US two-year and 10-year treasury bond bonds was 4.32% and 4.57% respectively, showing a flat overall performance, which limited the space for the US dollar to rise further.

In terms of technology, analyst Faruqui provided the following interpretation:

1. Price Trend Analysis of USD/CAD

From a technical perspective, the US dollar/Canadian dollar is currently in a consolidation state and has not been able to break through the key resistance level of 1.4450. The price trend in the past few days shows that although bulls have a certain advantage, their upward momentum is insufficient.

2. Support and Resistance Levels

Main support level: Short term support is at 1.4370; If it falls below this level, it may further test the psychological threshold of 1.4300.

Main resistance level: The upper resistance level is 1.4450; If it breaks through this level, the exchange rate may further approach 1.4500.

3. Technical indicator signals

Relative Strength Index (RSI): On the 14th, the RSI is currently around 72, indicating that the market has entered an overbought area and may face downward pressure in the short term, but the overall upward trend still dominates.

Moving Average (MA): The US dollar/Canadian dollar is currently above the 50 day and 100 day moving averages, indicating that the medium-term trend is still bullish, but caution should be exercised against the risk of short-term pullbacks.

MACD indicator: The MACD fast and slow lines are currently above the zero axis and at a higher position, indicating that the market has strong upward momentum, but the momentum may gradually weaken.

4. Market sentiment and trading volume

From the perspective of trading volume, the trading volume of USD/CAD has decreased in recent days, indicating that the market has a strong wait-and-see attitude during the holiday period and may be waiting for more fundamental news guidance.

summary

The slight rebound in crude oil prices has supported the Canadian dollar in the short term, but the slowdown in Canadian economic growth and possible loose policies from the Bank of Canada have limited the upward potential of the Canadian dollar. In terms of the dollar, the hawkish stance of the Federal Reserve provides support for the dollar, but the weak yield of treasury bond bonds limits the rise of the dollar. Overall, the US dollar/Canadian dollar exchange rate may remain volatile at a high level.