Canadian Dollar Outlook – USD/CAD Ramping into Big Resistance Test
USD/CAD Technical Highlights:
- USD/CAD is running hard into a cross-road of resistance
- Can break on through this time, or will it reverse?
- Due for a breakout after very dull year of trading
USD/CAD has been on a nice run since dropping hard into the final day of 2019. The run has a sizable area of resistance in play, but will the US Dollar be able to push on through, or will the Canadian Dollar fight back? Recent history suggests the latter is likely to happen.
However, USD/CAD volatility, along with FX volatility in general, sunk to unusually low levels last year. USD/CAD’s 2019 trading range was the smallest since 1996, and for the most part as last year progressed things got increasingly quieter. This sets up for a breakout. Perhaps now is the time.
But in being consistent with the usual approach, resistance will be respected until it is broken. A break on through to the other side of the 200-day, September & June trend-lines, and the big trend-line off the 2016 highs will be needed to spark even further strength. For that to happen a move is needed well into the 13300s at a minimum. Should it do-so, potential for a much larger rally is there.
On the flip-side, if resistance be respected, and USD/CAD reverses course once again as it has on several occasions last year, then shorts will likely become the flavor of the day. If this is the case, then range-like conditions are to persist, with a drop below 12900 needed before considering a broader breakout developing on the downside.
For now, keeping a close eye on the 13230/330-region and how price behaves upon a thorough test of the region. A strong rejection will help bolster the short’s case, while a drive on through will increase odds of longs having the upper hand.
USD/CAD Daily Chart (13230/330-area is big)
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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.