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Canadian Dollar Outlook – USD/CAD Broke Important Support

Canadian Dollar Outlook – USD/CAD Broke Important Support

Paul Robinson, Strategist

USD/CAD Technical Highlights:

  • USD/CAD broke long-term trend-line, 13000
  • After last year’s coiling price action, break could gain traction

USD/CAD closed the final week of last year with a charge below the 2012 trend-line, also creating a lower low from July by declining below 13000. Breaks during thinner holiday trade aren’t ideal, but for now will run with it as long as a sharp reversal doesn’t develop.

After last year’s contraction in price action resulting in the smallest trading range since 1996, USD/CAD is due to be cut free. Going with the initial break lower, the first level of support is currently being met right now via the downward sloped line connected by a pair of 2019 lows.

The slope is only considered minor in significance due to the angle running to the downside. On the weekly chart, solid price support doesn’t arrive until a swing-low created during 2018, under 12800. If volatility is to pick up, and the down-side is the direction in which it will develop, then that shelf is only likely to act as a resting spot before much lower levels are obtained.

Should the breakdown prove to be false, then some work will need to be done from here to turn the picture decisively bullish. The rising trend-line from 2012 and descending variation from 2016 will both need to be overtaken.

In either event, whether the large move is bearish or bullish, the fact that USD/CAD is crossing key levels after such tight trading conditions suggests that the market is waking up from its low-vol slumber, and this means there should be some good-looking set-ups soon for traders with short to intermediate-term time horizons.

USD/CAD Weekly Chart (t-line, lower-low)

USD/CAD weekly chart, t-line, lower-low

USD/CAD Daily Chart (levels near to watch)

USD/CAD daily chart, levels near to watch

USD/CAD Charts by TradingView

***Updates will be provided on the above thoughts and others in the trading/technical outlook webinars held at 1030 GMT on Tuesday and Friday. If you are looking for ideas and feedback on how to improve your overall approach to trading, join me on Thursday each week for the Becoming a Better Trader webinar series.

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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.