USD/CAD Technical Highlights:
- USD/CAD smallest annual range since 1996
- Price coiling, convergence in trend-lines near
The US Dollar’s annual trading range when looking at the US Dollar Index (DXY) is the smallest since 1976, and with regard to USD/CAD, barring a sizable move in the next two weeks, it will post the smallest range since 1996, but only by a small margin (4.7% vs 4.3%) before it would match 1989 (4.7%).
The fact that price has become so compressed on an annualized basis, and that the quarterly ranges have become sequentially smaller throughout the year (similar to a wedge pattern) suggests that a range expansion is in order next year, and also that it is likely to begin sooner rather than later.
With the stage set for a breakout in volatility, there is also a couple of trend-lines converging on one another from 2012 and 2016. These lines are set to intersect by February at the latest, which is supportive of an early Q1 breakout.
A break above the 2016 trend-line and 13382 is seen as having USD/CAD in bullish breakout mode, while a break below the 2012 trend-line and 13000 is seen as having the pair selling off.
Targets yet to be determined. A lot has to do with the power of the breakout, as a rally to 14500 or better or a sell-off to 12000 or lower are both within scope. The average annual range in the past decade, including this year, was just over 11%.
At the immediate moment USD/CAD is hanging onto support via the 2012 trend-line on the weekly/2017 on the daily time-frame. Given the time of the year and how trading has been, a bounce from here looks like the next short-term move.
USD/CAD Weekly Chart (trend-lines converging)
USD/CAD Daily Chart (holding trend-line for now)
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---Written by Paul Robinson, Market Analyst
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