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USDCAD has Lost Its Previously Won Positions

1/5/2023 11:33 AM

The US dollar shows weak growth against the Canadian currency during the morning session, recovering from a notable decline the day before. The USD/CAD pair is testing 1.3500 for a breakout, retreating from the local lows of December 5. Noticeable pressure on the positions of the US currency yesterday was exerted by macroeconomic data. Business activity index from the Institute of Supply Management (ISM) in the US manufacturing sector in December fell from 49.0 points to 48.4 points, which was worse than analysts' expectations by 0.1 points. In addition, traders drew attention to the minutes of the December meeting of the US Federal Reserve, which confirmed the readiness of the regulator to further tighten monetary policy.

In the near future, the focus of investors' attention will be on the December macroeconomic statistics on the labor market. Today in the US there will be a report from Automatic Data Processing (ADP) on employment in the private sector, which will precede the final publication from the Department of Labor on Friday. In turn, the Canadian report will also be released on January 6: current forecasts suggest that the Unemployment Rate may slightly correct from 5.1% to 5.2%, while the Employment Change will grow by only 8.0 thousand, slowing down from 10.1 thousand in November.

Bollinger Bands in D1 chart demonstrate a moderate decrease. The price range is expanding from below, not keeping up with the surge of "bearish" activity the day before. MACD has restored its previous sell signal (the histogram is below the signal line), and also moved into the negative zone. Stochastic shows similar dynamics, approaching its lows rapidly, which indicates the risks of the oversold US dollar in the ultra-short term.

Resistance levels: 1.3500, 1.3550, 1.3600, 1.3650. | Support levels: 1.3450, 1.3400, 1.3350, 1.3300.

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