Canadian Dollar Outlook – USD/CAD Vulnerable Following Breakdown
USD/CAD Technical Highlights:
- USD/CAD broke below long-term support, hangs precariously
- Not seeing much of a response, could be sign of changing character
To end last year, USD/CAD broke a major trend-line from 2012 and fell below the low of 2019 low to close at the year’s worst levels. This set the stage for a broader decline to get underway, something thus far we have yet to see gain traction.
But, the bounce thus far could be on the verge of stalling already, and if we look at how price action has played out in the past once bounces got underway, a stall here could be a sign of its character changing. That is, instead of fully reversing the last down-move, sellers are stepping in at a lower price, giving indication that this breakdown might be for real.
If that is to be the case, then we should see weakness start to take over here very soon. To really get USD/CAD rolling downhill, a break below the December 31 low at 12951, along with the underside trend-line from January 2019 will be needed.
The underside trend-line has held price up so far, but is viewed as the only support level remaining before the area just under 12800 comes int play. Thinking more broadly, whether we are amidst a large decline, or this turns out to be a fake-out and reverse to the upside – this year should bring a larger range than last year’s.
At nearly 700 pips, the annual range for USD/CAD was historically small, and so we should see a bit more freedom from CAD this year. Same goes for FX in general. So while trading has started off slow in 2020, look for that to change at some point and offer up some fruitful opportunities.
USD/CAD Weekly Chart (below t-line/lower lows developing)
USD/CAD Daily Chart (bounce stalling, watch 12951, lower t-line)
***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.