Canadian Dollar Price Outlook – USD/CAD Breakaway Gap May Have Staying Power
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USD/CAD Technical Highlights:
- USD/CAD breakaway gap on oil slashing to sustain
- Breakaway gaps are rare, but this one looks like it could hold
- Big picture target is 2016 highs, short to intermediate-term bias is bullish
On oil getting caught in the cross-hairs of a price war USD/CAD gapped sharply higher, then continued to surge on Monday. Given where the gap occurred, just beyond a macro-breakout price zone, it appears the breakaway gap is the real deal and will hold.
Breakaway gaps are unusual in FX, typically reserved for equity and futures markets; however, they do occasionally take place on powerful enough events, and can lead to significant price moves. Again, with the proximity of where this happened, it makes the potential higher that it can indeed sustain.
The 2016 trend-line was crossed in the two weeks leading up to the gap, and the 13382 level was hurdled from the second-half of last year. With this week’s powerful move there is serious enough separation to potentially lead to a broader move up to the 2016 high just shy of 14700.
Even though the general trading bias is bullish, the gap could still get challenged in the days ahead, but the low of Monday at 13517 shouldn’t break if the breakaway gap is to hold. A little digestion phase up here would do USD/CAD some good after becoming short-term overbought.
For now, a little patience may be needed to find a solid set-up. A consolidation pattern could give traders a plateau to work with for a short-term breakout event and renewed thrust higher.
USD/CAD Daily Chart (breakaway gap)
USD/CAD Weekly Chart (2016 high is long-term target)
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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.