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
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
The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.
FOREX.com is a registered FCM and RFED with the CFTC and member of the National Futures Association (NFA # 0339826). Forex trading involves significant risk of loss and is not suitable for all investors. Full Disclosures and Risk Warning. Increased leverage increases risk.
GAIN Capital Group LLC (dba FOREX.com) 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA. GAIN Capital Group LLC is a wholly-owned subsidiary of StoneX Group Inc.
© FOREX.COM 2024