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Canadian Dollar Price Forecast - Will USD/CAD Resistance Hold or Fold?

Canadian Dollar Price Forecast - Will USD/CAD Resistance Hold or Fold?

2020-01-29 10:30:00
Nick Cawley, Strategist

Canadian Dollar (CAD) Price, Chart and Analysis

  • USD/CAD has tried to break the 200-dma twice in the last two days. Third time lucky?
  • US dollar strength may be tested by the latest FOMC outlook.

USD/CAD Uptrend Halted by Long-Term Technical Resistance

Ahead of the latest FOMC rate decision and press conference, the short-term USD/CAD rally is hitting resistance and may need an additional boost to get passed this level. The recent sharp sell-off in the oil market has weighed on the Loonie and it remains to be seen if the oil market is set to rebound. Markets are starting to fear a global economic slowdown due to the spread of the Chinese coronavirus, and the oil market is taking the hit.

Later in the session the latest FOMC rate decision with Fed chair Powell’s post decision commentary expected to be followed closely. The Fed will leave all policy settings unchanged and will likely indicate that monetary policy is appropriate after the three 0.25% interest rate cuts made in 2019. Recent US data has been mixed-to-slightly better so Fed chair Powell will be in no rush to change monetary policy in the short-term.

USD/CAD Price Running Into Resistance

USD/CAD’s rally since the end of 2019 has seen the pair pierce through both the 20- and 50-day moving averages seemingly with ease, yet the longer-dated 200-dma is proving difficult to break in the last two days. The daily chart shows that since the start of June the 200-dma has been broken three times, but none of these breaks have really taken hold, with the last two breaks seeing a sharp sell-off ensue. Lower highs also dominate the chart since the end of May 2019 and unless these are broken – a close above 1.3330 is needed, then the pair may fade lower again. The CCI indicator suggests that USD/CAD remains overbought. However, data from the recent CoT report shows speculative net-longs in the Canadian dollar rising for a fourth consecutive week. Today’s FOMC meeting may well see this long-term technical resistance hold or fold.

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USD/CAD Daily Price Chart (May 2019 – January 29, 2020)

USD/CAD Daily price chart
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of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily -5% -13% -9%
Weekly -35% 13% -20%
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Traders may be interested in two of our trading guides – Traits of Successful Traders and Top Trading Lessons – while technical analysts are likely to be interested in our latest Elliott Wave Guide.

What is your view on the Canadian Dollar (CAD) – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.