Canadian Dollar Forecast: USD/CAD Falls to Big support
USD/CAD Price Forecast:
- USD/CAD underwent a significant reversal this week, slipping from 1.3369 to 1.3035
- With risk appetite raging, the Canadian Dollar may look to press its advantage if support near the 1.3035 and 1.2933 can be broken
- How Will Markets React to the 2020 US Presidential Election?
Canadian Dollar Forecast: USD/CAD Falls to Big Support
USD/CAD, like many markets this week, has been subjected to immense volatility. Weathering an election and a FOMC rate decision, the pair has been battered down, falling from 1.3369 on November 2 to the 1.3035 area headed into the weekend. Now that much of the event risk has passed, will USD/CAD extend lower?
Canadian Dollar (USD/CAD) Price Chart: Daily Time Frame (June 2019 – November 2020)
Well, before the Canadian Dollar can establish further gains, it will have to pierce an area of notable support slightly above 1.3000. The zone coincides with various swing lows dating back to July 2019, suggesting it has notable influence. That being said, technical levels are made to be broken and the pair has been on a downtrend since mid-March so suggesting the level can single-handedly reverse the decline may be presumptuous.
USD/CAD Price Chart: 4 – Hour Time Frame (June 2020 – November 2020)
Further still, IG client sentiment data reveals a steep divergence in retail positioning. Despite the declines, retail traders have piled into the long side, hoping support will mark the bottom. That said, hope is poor strategy and we typically take a contrarian stance to sentiment data, suggesting USD/CAD may decline further.
Should USD/CAD break the level, secondary and tertiary support is not immediately clear. An initial area of buoyancy may reside at the September swing low, just near 1.2993. Beyond that, tertiary support may rest around the 1.2950 level. In the meantime, follow @PeterHanksFX on Twitter for updates and analysis.
--Written by Peter Hanks, Strategist 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.