USD/CAD Forecast as a Cup and Handle Pattern Forms
The USD/CAD exchange rate continued its bullish trend as investors reacted to the strong US dollar and the falling crude oil prices. It rose to a high of 1.3200, which was the highest level since July 14 of this year. It has jumped by more than 3.50% from its lowest level in August.
Falling oil prices
Canada is one of the biggest crude oil exporters globally. As a result, the country’s economy does well when oil prices are at elevated levels. This week, the opposite has happened as investors continue to worry about demand.
Brent, the international benchmark, fell to a low of $92.83 while West Texas Intermediate (WTI) crashed to $87. This price action accelerated after the relatively weak global manufacturing PMI data. According to S&P Global and Caixin, China’s manufacturing PMI dropped from 50.4 in July to 49.5 in August. This decline was worse than the median estimate of 50.2.
The contraction of the manufacturing sector was attributed to the country’s Covid-19 protocols and the ongoing heat wave in the country. Sadly, more Chinese cities are locking down their economies. For example, Chengdu, a large metropolis of over 21 million people announced a new series of lockdowns to prevent the spread of the illness.
The USD/CAD price has also surged because of the hawkish Federal Reserve and a stream of positive economic data from the United States. Data published by Conference Board earlier this week showed that the country’s consumer confidence jumped to 103 in August. Another report showed that the number of vacancies in the country has continued rising.
As a result, the Federal Reserve has insisted that it will continue hiking interest rates in the next few months. In addition, the bank will maintain rates at elevated levels even when inflation slips.
USD/CAD forecast
The four-hour chart shows that the USD/CAD pair has been in a strong bullish trend in the past few weeks. Along the way, the pair has formed a cup and handle pattern that is shown in black. It has also moved above the 25-day and 50-day moving averages. Therefore, there is a likelihood that the pair will continue rising as bulls target the next key resistance level at 1.3350.
