Canadian Dollar Price Outlook: Will Resistancec Stall the USD/CAD Pop?
Canadian Dollar (USD/CAD) Price Forecast:
- USD/CAD rebounded notably after bleeding lower two weeks ago and threatening further losses
- Despite the rally higher, the resistance overhead has stalled previous attempts higher and may again
- Learn the different trading styles to see what type of price action best suits you
Canadian Dollar Price Outlook: Will Resistance Stall the USD/CAD Pop?
The Canadian Dollar lost ground against the Greenback over the last week and has reclaimed a few technical levels as a result. The pop has also driven USD/CAD within earshot of a descending trendline overhead, a trendline that has helped eradicate previous rallies. With that in mind, can bulls drive USD/CAD through the level which has proved its influence, or will the barrier work to stall yet another rally?
USD/CAD Price Chart: 4 – Hour Time Frame (March 2020 – May 2020)
As it stands, there are arguments to be made for either side. As I noted last week “the series of lower-highs speaks to simultaneous weakness on the technical side and a break beneath recent lows around 1.3855 would be a major step in forming the next stint lower. However, a successful hold above the level could see USD/CAD rebound somewhat, but a series of topside barriers will look to keep gains contained.”
Evidently, a reversal off support has resulted in a noteworthy trip higher and the time of reckoning for the descending trendline around 1.4147 appears near. With that in mind and considering that the broader trend since mid-March has been USD/CAD weakness, one could argue the trendline offers an attractive area to explore bearish opportunities from a risk reward perspective.
Still, there are considerations to be made. First and foremost, are the recent comments from Fed Chairman Jerome Powell on Wednesday in which he talked down the prospect of negative interest rates for the time being. Thus, an important question to ask is if the fundamental shift is enough to fuel a break above the descending trendline. Another threat to broader USD/CAD weakness is resurgent risk aversion which equity markets hinted at throughout the week.
Thus, a reversal lower at the trendline is far from certain, but it does provide an appealing opportunity to set levels of invalidation while looking for areas of interest beneath – possibly around prior lows. As price action develops, follow @PeterHanksFX on Twitter for updates.
--Written by Peter Hanks, Analyst for DailyFX.com
Contact and follow Peter on Twitter @PeterHanksFX
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.