Canadian Dollar Price Outlook: USD/CAD Bounce Runs into Resistance
Canadian Dollar Price Outlook Talking Points:
- USD/CAD is testing a zone of resistance as taken from support that held from mid-March to mid-June, running from 1.3250-1.3300.
- The pair put in a pronounced downside move earlier this month on the back of the Bank of Canada rate decision. But after a key zone of support came into play, prices have since bounced into the current zone of resistance.
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USD/CAD Drive to Support, Bounce to Resistance
A little over half-way through September and it’s been a very busy outing for the US Dollar. Riding a wave of strength into the month only to reverse after US traders returned after Labor Day, the Greenback ran into support last week. That support held into this week and yet another bounce developed ahead of tomorrow’s widely-watched FOMC rate decision. The FOMC is expected to cut rates at tomorrow’s meeting, but the larger focus will be on the accompanying context, namely the dot plot matrix contained in the Summary of Economic Projections, looking for clues as to how aggressive the bank might be with rates in Q4 and 2020.
In USD/CAD, those recent themes in the US Dollar have been showing in an exaggerated manner, helped by a BoC rate decision earlier this month that saw the Bank of Canada avoid the topic of rate cuts. That added a dose of CAD strength to USD/CAD, which had already run into a key area of resistance in late-August, taken from a prior support zone consisting of a few different Fibonacci levels. That drove price action in USD/CAD all the way down to a key support zone around another Fibonacci level at 1.3132 that came into play last week, helping to cauterize the bearish move.
USD/CAD Four-Hour Price Chart
Since that support came into play, prices in USD/CAD have bounced back into another key zone, taken from the 1.3200-1.3250 area on the chart. This zone had functioned as support for a three-month-period earlier this year, from mid-March to mid-June. The big question now – can sellers hold this retracement at bay around this key zone to push down to fresh lower-lows in USD/CAD?
USD/CAD Daily Price Chart
USD/CAD Strategy Moving Forward
At this stage, USD/CAD may remain as one of the more attractive venues for a return of USD-weakness and given a continued hold below the Friday high around 1.3288, the door can remain open for bearish swing and longer-term strategies, with similar targets as the setup investigated a couple of weeks ago, taken from 1.3200 and 1.3132. If that second area can give out on a recurrent approach, deeper profit target potential can go down towards the 1.3000 psychological level that proved so tough to break in July. Shorter-term approaches may be able to focus on themes of strength, and that is looked at below.
USD/CAD Eight-Hour Price Chart
On a shorter-term basis, USD/CAD is holding trend-line support. This may not be the most attractive venue for themes of USD-strength given the recent penchant for CAD-strength but, for traders that do want to push that theme, the item of importance is a hold above the 1.3230 swing-low, at which point short-term targets can be directed towards the 1.3275 area, and if that’s met, break-even stops can be utilized to look for additional topside drive.
USD/CAD Hourly Price Chart
To read more:
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--- Written by James Stanley, Strategist for DailyFX.com
Contact and follow James on Twitter: @JStanleyFX
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.