Technical analysis of CAD/USD: fluctuations linked to the US dollar as the holiday market limits volatility

Intraday Patterns Reveal Signs of Weakening in the USD Rally

In the context of the holiday season, the behavior of the Canadian dollar has been closely linked to movements in the US dollar. Recent technical data suggest a significant shift in market dynamics. Specifically, the formation of a “hanging man” pattern on today’s charts contrasts with the “hammer” pattern recorded at the end of December, indicating a potential loss of momentum in the USD rebound from its December 26 low.

Critical levels that will determine the short-term direction

For the USD to maintain its recent New Year recovery, it would need to consolidate above 1.3810. Conversely, the CAD finds its potential support around 1.3750, with a deeper support level at 1.3725. These thresholds will be crucial in the upcoming trading sessions.

Canadian economic calendar as a key factor

The intensity of economic releases in Canada is about to increase significantly. In the coming days, updates on PMIs and trade data will arrive, although the main focus is on the employment report scheduled for Friday. At the end of last year, the Canadian dollar gained considerable ground when economic data exceeded expectations. If this positive trend continues, especially with robust employment figures, the CAD could extend its gains against its US counterpart.

Global context: PMI and limited volatility

During the holiday period, the S&P Global Manufacturing PMI rose to 48.6 in December, although it remains in modest territory. With reduced trading volume due to the holidays, the range of fluctuations has been contained, allowing traders to focus on broader USD movements and their implications for the CAD.

The coming days will be decisive in determining whether the USD’s bullish momentum can be sustained or if it cedes ground to a recovery in the Canadian dollar.