Canadian Dollar Price Outlook – USD/CAD Turn Puts Focus on Downside
USD/CAD Technical Highlights:
- USD/CAD turned down off key area of resistance
- Recent history suggests more weakness ahead
- A breakout above 13382 needed to get things moving higher
USD/CAD snuck above the 2016 trend-line, but was quickly met by a stack of resistance soon after. The couple of weeks spent around 13320 back in late November, early December proved to be too much as price action started to lose momentum.
The turn down has thus come as little surprise, especially when you throw into the mix that FX volatility is trading at record lows. That doesn’t make for a strong backdrop for breakout conditions, especially when by recent standards USD/CAD had become extended.
But, given that last year was the smallest trading range since 1996 it is likely at somepoint this year we will see a range expansion. I’m still leaning towards that being to the upside, but not until a full clearance of highs back to September can be made. The threshold that needs to be crossed is 13382.
Looking at the near-term, the risk is that a further retracement is in order. How clean the move is yet to be determined. So far the two-day move off the high has held some power, but it would be unsurprising even if price is to move lower that we don’t first see some short-term choppiness.
Tactically speaking, as long as USD/CAD stays below 13329 in the short-term then the other levels up to 13382 won’t be threatened. The first level of support to watch is the 200-day at 13222, but after that there isn’t any meaningful price support until under 13000. That doesn’t mean price must fall that far before finding buyers again, but it does make a downside target unclear. Watching how any sell-off develops momentum from here will be the key.
USD/CAD Daily Chart (turned down from resistance)
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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.