USD/CAD Technical Outlook: Continuing to Extend, Levels to Watch
21 Sep 2022 13:00, GMTUSD/CAD Technical Outlook
- USD/CAD breakout is sticking so far with good momentum staying in place
- With the dollar higher, stocks lower scenario looking likely to continue so will CAD weakness
- Levels and lines to watch in the days ahead
USD/CAD Technical Outlook: Continuing to Extend, Levels to Watch
USD/CAD is finally making good on a breakout with strong momentum having been with the pair for over a week now. Breakouts often fail for this pair, but as noted last week with repeated attempts to break out of the 13207/23 area finally giving way to momentum, coupled with general risk-off, it looked like a breakout could finally stick.
To be fair, it looked like it was on the verge of failing just the other day when it put in a full reversal day, but given that the reversal only led to a test of the breakout zone it was still given the benefit of the doubt. Yesterday’s rip to new cycle highs continues the trend.
USD/CAD is getting into some levels here as swing highs from September and October 2020 come into play in the 13390/418 area. The thinking is that while they may matter in the near-term, bigger picture they won’t.
Conviction is high that stocks see a new bear market cycle low this fall, and at the same time the dollar will continue to propel higher. USD/CAD has a 21-day correlation of -0.92 to the S&P 500, so it is essentially a play on stocks.
Should we see stocks rally a bit before heading lower, watch the breakout zone in the low 13200s for support. On the top-side should we see strength persist or pick up again after a dip, the area around 13700 will be next up as a potential hurdle.
USD/CAD Daily Chart
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---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.