Forex: USD/CAD Technical Analysis – Further Weakness Seen Ahead
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- USD/CAD Technical Strategy: Flat
- Support: 1.0970 (38.2% Fib ret.), 1.0892 (50% Fib ret.)
- Resistance: 1.1067 (23.6% Fib ret.), 1.1223 (Jan 31 high)
The Canadian Dollar’s march higher against its US namesake paused a bit after prices slipped below support at 1.1067 marked by the 23.6% Fibonacci retracement. Positioning continues to suggest the path of least resistance favors the downside however, with sellers aiming for the 38.2% level at 1.0970. A break below this boundary targets the 50% Fib at 1.0892. Alternatively, a reversal back above 1.1067 aims for the January 31 high at 1.1223.
As we noted yesterday, risk/reward considerations allow for a short position with an entry price no lower than 1.1019. However, we will opt to remain on the sidelines from a tactical perspective considering the pair’s relationship with yield spreads. That warns against the short side as the priced-in policy outlook for the coming year leans in favor of USD by a hefty 31bps. With that in mind, we will treat the pullback as a budding buying opportunity, not a tradable downswing.
Daily Chart - Created Using FXCM Marketscope 2.0
--- Written by Ilya Spivak, Currency Strategist for DailyFX.com