Canadian Dollar Outlook: USD/CAD Rally Looks to Have Staying Power
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Canadian Dollar Highlights:
- USD/CAD breakaway gap looks legitimate on volatility explosion
- We may see some backing-and-filling in days ahead but generally bullish
USD/CAD breakaway gap looks legitimate on volatility explosion
In last week’s forecast, USD/CAD was in focus as a potential breakout candidate with volatility having yet caught fire like it did in other currency pairs. With the shocking move in oil that quickly changed – 3-month implied volatility rocketed from 5.25 to over 11 by Thursday. A massive move indeed, and with it a 5-figure move in USD/CAD up to 13961.
The gap on the Sunday gap was an unusual occurrence in FX, and often times these are filled quickly. But given where it took shape, after breaking out above the 2016 trend-line and resistance from H2 of last year, it has the makings of a longer-term bullish breakaway gap.
If this is the case, then at worst the bottom of the gap around 13517 will be tested but not broken with any meaning. If USD/CAD is indeed as bullish as the breakout and run last week suggests, then that likely won’t come under threat. But still a period of sideways trading may unfold as the market digests the initial burst.
Next week might not bring rip-roaring price action, but will be well worth paying attention to as it could give some good signaling as to whether it wants to make another run in the relatively near future. A consolidation pattern could go a long way towards firming up a short-term breakout pattern with good risk/reward.
USD/CAD Daily Chart (in breakout territory)
USD/CADWeekly Chart (macro move higher in the works)
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---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.