USD/CAD Technical Analysis: Trying To Fend Off Move Above 1.3800
Can CAD rebound in 2Q? See our free forecast to find out what’s driving market trends !
- USD/CAD technical strategy:rejection off 1.38 important
- USD/CAD working on bearish key day (close < 1.3700 needed)
- Despite weak CA employment report, short unwind worth watching
Much like the drop in Crude Oil over the last few weeks, the drop in the Canadian Dollar has been fast and furious. In mid-April, USD/CAD was trading near 1.3200 around the same time that Crude Oil was trading north of $53/bbl. Fast forward to the end of May’s first trading week and Crude Oil has an intraday low nearly 20% lower at $43, and the Canadian Dollar traded as low as $1.38 to the USD.
The correlation to CAD and Crude Oil is common knowledge even if the strength of the correlation ebbs and flows from month to month. This week, Crude Oil went from bad to worse as there appeared to be a capitulation of long trades that were exited as multiple forms of price support continued to break. The same seemed to happen for the Canadian Currency, which sat at or near the bottom of the G8 SW ranking for most of the week with the Japanese Yen and the Australian Dollar, which is also correlated to commodities like Iron Ore.
Despite Friday’s price action, traders should be weary of fighting this trend. We see a possible bearish key day, which would be confirmed if Friday’s close took place below Thursday’s low of 1.37002. However, there is clear support at 1.36/35 that could hold on a pull-back and set the price of USD/CAD ready to resume a move to the 61.8% retracement of the 2016 price range at 1.3838 if not higher. Only a move below the 1.36/35 zone would help to make the argument that the similarly weak USD is in for further downside as the commodity bloc begins to recoup some fast losses.
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Chart Created by Tyler Yell, CMT
What do retail traders’ buy/sell decisions hint about the CAD trend? Find out here !
Shorter-Term USD/CAD Technical Levels: Friday, May 5, 2017
For those interested in shorter-term levels of focus than the ones above, these levels signal important potential pivot levels over the next 48-hours.
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