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USD/CAD’s Converging Support Levels May Offer Scalping Opportunity

USD/CAD’s Converging Support Levels May Offer Scalping Opportunity

2010-07-08 15:10:00
John Rivera, Currency Analyst
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Key Technical Levels

The USD/CAD has been in a bearish rally over the past few days as risk appetite has returned which has favored the Canadian dollar. A surprising decline in U.S. jobless claims fueled prevailing optimism sending the pair lower in early trading. However, we have seen bullish conviction wane as the pair has come up against technical resistance which could lead to a period of consolidation. The looming Canadian employment report also adds to the case for subdued price action ahead of the event risk. However, global factors have had a significant impact on the pair’s direction and should be monitored as well.  

 SR 10-07-08_1

The 20, 50 and 200-Day SMA’s are converging at 1.0410/20 which could limit downside risks for the pair. We are also seeing potential support from the 38.2% Fibo of 1.0861- 1.0140 there as well. Equity markets continue to push higher and the prevailing risk appetite and technical resistance may create an ideal scalping environment. Currently, there aren’t any discernable short-term patterns and traders may want to wait for them to develop in order to indentify levels to target. 

SR 10-07-08_2

 SR 10-07-08_3

Quantitative Metrics

The USD/CAD has seen its ATR decline to 124 pips making it one of the least volatile pairs and a potential scalping target. Yet, we have seen its Bollinger band width begin to widen as its level of variance is increasing as the pair has been prone to short-term trends. However, at 569 pips it remains one of the lowest amongst most traded pairs. One week implied volatility readings continue to point toward broader markets quieting, which may signal the beginning of the typical summer lull, an opportune time for scalpers.  

 SR 10-07-08_4

SR 10-07-08_5

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