Stalking A Reversal in USD/CAD
- Sentiment nearing extremes in CAD
- Major support zone getting tested
Unfamiliar with Gann Square Root Relationships? Learn more about them HERE.
The Canadian Dollar is very loved at the moment. On Thursday USD/CAD touched its lowest level since the start of the year and grinded further through a major support zone we see between 1.0600 and 1.0650. Not surprisingly sentiment has turned very positive on the Loonie here (negative USD/CAD) with the Daily Sentiment Index reaching 86% bulls on Thursday. This is in the warning area, but not quite at the extreme stage that would herald in a reversal. USD/CAD is somewhat notorious in the FX trading world as being one of the more difficult rates to trade for its tendency to overshoot levels. This is starting to look like the case in USD/CAD and a move under 1.0600 (and probably the year’s low at 1.0587) would no longer surprise before a reversal. This actually would fit well with the seasonal tendency in the rate which shows USD/CAD weakens into the second week of the month before moving steadily higher over the remainder. We need to see some sort of positive development in the pair before looking to position against this clearly powerful trend. A move under 1.0600 in the days ahead followed by a close back above the figure would likely suffice.
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USD/CAD Daily Chart: July 4, 2014
Charts Created using Marketscope – Prepared by Kristian Kerr
Key Event Risk in the Week Ahead:
LEVELS TO WATCH
Resistance: 1.0685 (Fibonacci), 1.0750 (Gann)
Support: 1.0600 (LT Trendline ), 1.0587 (YTD low)
Strategy: Buy USD/CAD
Entry: Buy USD/CAD on a close above 1.0600 following a decline below the figure
Stop: 1-day close below 1.0540
--- Written by Kristian Kerr, Senior Currency Strategist for DailyFX.com
To contact Kristian, e-mail firstname.lastname@example.org. Follow me on Twitter at@KKerrFX.
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.