The USDCAD currency pair is looking to complete its sixth daily gain in the last seven days, as a sustainable breakout looks imminent despite the recent US credit rating downgrade. Mixed data on Tuesday caused slight uncertainty, but the greenback eventually prevailed to continue its dominance in the currency market.
The Canadian dollar has slightly retreated as inflation has noticeably slowed down. In addition, Canadian manufacturing activity remained in the contractionary territory at 49.6, up from 48.8 in the prior period. While there was an initial reaction to the rating agency, Fitch, downgrading the top US government credit rating from AAA to AA+, the currency pair quickly recovered to continue its trend. US data also revealed the ISM Manufacturing PMI rising from 46 to 46.4 but missing the 46.8 forecast to the downside. Labour data also signalled lower-than-expected job openings in the US, but the figures still reflected levels expected in a tight labour market.
Technical
On the 4H chart, an ascending channel experienced a temporary breakout before retesting the dynamic channel resistance at the Fibonacci golden ratio of 1.3269. The currency pair found buyers on the retest, signalling the potential for a sustainable run-up in the upcoming sessions.
The currency pair could trickle up toward resistance at 1.3333, where a breakout could trigger an additional leg to the psychological resistance at 1.3355. If the NFP data on Friday support the greenback, higher resistance at 1.33821 could soon come into play.
However, if the currency pair loses steam in the upcoming session, support at 1.3282 could become pivotal. Some key levels of support could come into play if a breakdown occurs, including the Fibonacci golden ratio at 1.3269, followed by the daily pivot support at 1.3250. The downside momentum may require a fundamental shift in soft NFP data to initiate a further breakdown toward the Fibonacci midpoint at 1.3237.
Summary
Despite a government credit rating downgrade, the greenback has made strides against its major currency counterparts. The USDCAD may use support at 1.3282 to move sustainably higher from the channel breakout toward 1.3333.
Sources: Koyfin, Tradingview, Reuters
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