Canadian Dollar Price Analysis: USD/CAD Breaks Out from Falling Wedge

Canadian Dollar, USD/CAD Talking Points:

• USD/CAD has broken out of a short-term falling wedge formation that was looked at in this week’s US Dollar Price Action Setups.
• On a longer-term basis, USD/CAD is pushing higher from a test of range support, keeping the door open for bullish continuation scenarios within the scope of the bigger picture range.
• I’ll be discussing these themes in-depth in the weekly webinar on Tuesday at 1PM ET. It’s free for all to register: Click here to register.

US Dollar strength has shown again albeit in a somewhat tepid manner in the DXY. But, if taken with the addition of Canadian Dollar weakness, the USD/CAD trend is showing bullish behavior with a topside break from a falling wedge formation. I had looked into this in this week’s US Dollar Price Action Setups article, highlighting both USD/CAD and USD/JPY as potentially attractive areas for venues of USD-strength. The USD/JPY setup put in a strong topside move to start the week, running up to the 135.00 level before finding resistance, and now USD/CAD looks to be putting in bullish indications as buyers have pushed price into a short-term breakout.

USD/CAD Four-Hour Price Chart

Taking a step back to the daily chart can help to highlight the slightly longer-term picture in the pair. As looked at coming into this week, the pair has shown a proclivity to range over the past six months. And the recent fall in USD/CAD took place rather quickly over a two-week period to start April, which propelled price all the way from resistance around the 1.3800 handle in late-March down to support inside of the 1.3300 level last Friday.

That was around the time that support began to show up at a Fibonacci level plotted at 1.3338, which is the 50% mark of the 2020-2021 major move. This was the same major move from which the 61.8% retracement had provided a spot of resistance ahead of a breakout last month, before showing up for support for a couple of weeks ahead of that sell-off that pushed price back down to support. That level is at 1.3652 and remains of interest for topside scenarios.

USD/CAD Daily Price Chart

 Chart prepared by James Stanley, USD/CAD on Tradingview

USD/CAD Short-Term

For this breakout to turn into a near-term trend, bulls are going to have to put in some more work. This week has shown a progressive build of higher-highs and lows but there hasn’t been a significant test yet. There is a spot of support that remains of interest, plotted around the 1.3412 level, with another around 1.3360. If bulls can’t hold those supports the prospect of bullish continuation scenarios won’t look as attractive; but if buyers can hold the lows above those support levels, particularly the 1.3412 level, the door remains open for a run up towards 1.3500 after which 1.3554 comes into the picture, followed by that same 1.3652 Fibonacci level.

USD/CAD Two-Hour Price Chart

--- written by James Stanley, Senior Strategist