This pair has now reached the levels it turned lower from in 2009. While the weekly trend higher has been very strong, it has also been pretty extended over the last two to three weeks. The pair trended nicely in a channel until the year end when it broke to the upside. Once a trend moves too far too fast it becomes vulnerable and corrective moves are usually larger. This volatility serves often as a signal to take some money off the table as the trend might be growing old. However, we are not yet that far with the USDCAD. The trend is extended but we have not seen the increased volatility yet. Oscillators are overbought as usual in this occasions and the nearest weekly support and resistance levels are 1.2460 and 1.2799.
In the daily chart the trend is still higher but the yesterday’s candle had a lower close than the one before it. In addition, it was a wide range candle with a close at the day low which suggests that the sellers outnumbered buyers all day long. This has not happened since the beginning of the year and could mean that we have a bit more volatility coming up over the next couple of weeks. Price is now reacting lower from the low Friday’s pivot candle low while the oscillators are rolling over from overbought area. The nearest support area is between 1.2460 and a 23.6% Fibonacci retracement level at 1.2514. The 1.2460 area also coincides with the lower end of the rising regression channel.
USDCAD, 240 min
After forming a lower high in the 4h time frame yesterday the price has broken a short term trendline and is now between a support (1.2556) and resistance (1.2644). There is some potential support at right below the current area as the lower Bollinger Bands are getting near and the 23.6% Fibonacci level identified in the daily time frame (at 1.2514) is also relatively close. The high at approx. 1.2500 from 27th January also coincides with the proximity of the 23.6% Fibonacci retracement.
A wide range daily bar closing below the previous low has a bearish indication for USDCAD and suggests that something has changed in the market participants’ collective opinion since this has not happened during this year’s run up in USDCAD. This coincides with the period crude oil is climbing above the $50 dollar mark and dollar index (DXY) is in a potentially creating a lower daily high. This implies at least a pause in the trend, i.e. sideways move rather than immediate moves into new highs. It therefore makes sense to look for intraday trading opportunities and follow the smaller timeframe price action at support and resistance level identified in the 4h chart. At the time of writing price is reacting higher from 1.2556 support level and as the support seems to hold could provide intraday opportunities on the long side. The next support area is between 1.2460 and a 23.6% Fibonacci retracement level at 1.2514. The levels close to 1.2460 coincide with the lower end of the rising regression channel. That would be a logical area to look for signals for swing trade entries. For those interested in longer term position trading: we should keep in mind that the US economy is the stronger one of these two and we should therefore eventually see USDCAD moving beyond the latest highs.
Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.
Chief Market Analyst