- USD/CAD testing key resistance confluence- rally vulnerable sub-1.2777
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USD/CAD prices have rallied more than 4% off the monthly lows with the advance now testing a critical resistance barrier we’ve been tracking for weeks now around 1.2723. The advance looks vulnerable heading into tomorrow’s Canada CPI report and the focus is on a possible near-term exhaustion play off these levels.
USD/CAD Daily Price Chart
Technical Outlook: In my USD/CAD Weekly Technical Perspective published earlier this month, we noted that the USD/CAD, “rebound may have further legs near-term but ultimately we’re looking for exhaustion in price on a rally towards the 200-week moving average at 1.2620s and confluence resistance into the December high-week reversal close at 1.2726 (bearish invalidation).”
Price is testing this key resistance confluence today at 1.2715/23 where basic slope resistance converges on the 61.8% extension of the February advance and the 200-day moving average. The immediate topside bias is at risk here with a daily close above 1.2777 needed to suggest that a larger breakout is underway. That said, we’re looking to fade strength near-term while below this threshold.
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USD/CAD 120min Price Chart
Notes: A closer look at USDCAD price action shows the pair trading within the confines of a near-term ascending Andrew’s pitchfork formation with today’s rally failing at the upper parallel- further highlighting the 1.2715/23 resistance range. Look for interim support at 1.2663 with near-term bullish invalidation now raised to 1.2626.
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Bottom line: Looking to fade strength while below 1.2723 with a break of the lower parallel needed to validate the reversal targeting 1.2797 & the 61.8% retracement at 1.2566. Keep in mind we get the release of Canada CPI (Consumer Price Index) tomorrow with the release likely for fuel added volatility in the Loonie crosses.
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USD/CAD IG Client Sentiment
- A summary of IG Client Sentiment shows traders are net-long USD/CAD- the ratio stands at +1.28 (56.2% of traders are long) – bearishreading
- Long positions are 14.2% lower than yesterday and 19.4% higher from last week
- Short positions are6.2% lower than yesterday and 28.8% lower from last week
- We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests USDCAD prices may continue to fall. However, tradersare less net-long than yesterday but more net-long from last week and the combination of current positioning and recent changes gives us a further mixed USDCAD trading bias from a sentiment standpoint.
Relevant USD/CAD Data Releases
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- Written by Michael Boutros, Currency Strategist with DailyFX
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