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The USDCAD downward dynamics in the future

8/1/2022 3:11 PM

Against a downward correction in the US dollar quotes due to a technical recession in the world's largest economy, the USD/CAD pair broke through the key support level of 1.2835 and is now trading around 1.2770.

Investors fear that the US regulator's "hawkish" rhetoric on raising interest rates to fight record inflation will lead to a fall in the country's gross domestic product (GDP) and a deterioration in citizens' standard of living. Traders are selling the dollar, waiting for renewed macroeconomic data.

In turn, Canada's GDP in May showed a zero result, although analysts predicted a fall of 0.2%. The oil rate has stabilized above 95.00, which supports the Canadian dollar and acts as a driver for the decline of the USD/CAD pair, with the target at 1.2525 in the long term.

The combination of these factors strengthens the Canadian currency, so the decline in the USD/CAD pair is likely to continue with the target at 1.2525 in the long term.

The long-term trend has changed to a downtrend after the breakdown of the key support level of 1.2835, and now the downside target is the May low of 1.2525. The level of 1.2835 is resistance, from which it is worth considering selling the asset.

The medium-term trend is also downwards. Today the price is approaching the target zone 2 (1.2777–1.2756), after the test of which large players may fix sales and develop an upward correction. The key resistance of the trend is shifting to 1.3020–1.2998, from where we can consider selling with the target at 1.2777.

Resistance levels: 1.2835, 1.2935. | Support levels: 1.2525, 1.2431.

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