Canadian Dollar Technical Forecast – Talking Points
- USD/CAD trades near wedge support, with the 200-day SMA just below
- EUR/CAD continues to move lower within a sharp downward channel
- NZD/CAD bounces from strong level of support, further gains uncertain
USD/CAD Forecast: Slightly Bullish
The Canadian Dollar got off to a positive start against the US Dollar since October began, with USD/CAD down nearly a full percentage point. The Loonie’s strength comes after five months of losses versus the Greenback. However, a Falling Wedge pattern has taken shape, which puts a bullish bias on the currency pair.
USD/CAD traded against the lower bound of its wedge pattern on Friday, putting a breakdown below support on the cards. If that does occur, prices won’t have far to drop before running into potential support. The high-profile 200-day Simple Moving Average is trending near 1.2512 – just below the current levels. On the other hand, and perhaps more likely, prices may bounce from support and move higher to test wedge resistance.
USD/CAD 8-Hour Chart
Chart created with TradingView
EUR/CAD Forecast: Bearish
The Canadian Dollar has made more progress versus the Euro, with EUR/CAD’s current monthly loss approaching 1.25% on Friday. That would add to CAD’s prior month gains versus the Euro. Price began to fall sharply in late September. The bearish price action in the currency pair has created a downward channel, which has contained price action over the last few weeks.
Given the current trend, it’s fair to assume that the Canadian Dollar will continue its current course against the Euro. That said, EUR/CAD’s outlook is skewed to the bearish side. Moreover, the recent crossover between the 20-day and 50-day Simple Moving Averages (SMAs) highlights the current strength in bearish momentum.
EUR/CAD 8-Hour Chart
Chart created with TradingView
NZD/CAD Forecast: Bearish
The Canadian Dollar outperformed the risk-sensitive New Zealand Dollar in September. That brought NZD/CAD to a support level that has held firm several times since mid-July. Prices quickly breached that level on an intraday basis last week, although quickly leveled off above the support level. Still, NZD/CAD is down nearly half a percent on the month.
The currency pair is unlikely to see an extended selloff from these levels however, conspiring the strong technical support. A drop lower would treated the June swing low, which is the 2021 low at 0.8599. If prices continue to rebound from here, the falling 9-day Exponential Moving Average (EMA) could pressure prices. RSI is bouncing from the 30 oversold level.
NZD/CAD Daily Chart
Chart created with TradingView
--- Written by Thomas Westwater, Analyst for DailyFX.com
To contact Thomas, use the comments section below or @FxWestwater on Twitter
