USD/CAD Technical Highlights:
- USD/CAD trading around the 2016 peak
- Pullback risk heighted in near-term
- Longer-term, 16000+ looks to be in the cards
USD/CAD is seeing strong tailwinds from oil cratering and dollar demand, pushing the pair to the initially targeted 2016 high following the breakaway gap last Sunday. But now that it is there, it may need a breather.
The thinking is that it won’t necessarily make for the best short, as the bigger picture trend is pointed higher, but nevertheless a retracement trade could be in the works. A period of digestion would do the recent surge some good for setting up for another long trade just a little ways down the road.
The peak to cross is 14689, a level that USD/CAD was just shy of reaching in overnight trade before weakening up a bit. A convincing crossing over the 2016 high sets up for a move towards the 2002 high at 16185.
This might sound like a big target, but not really when looking at the 3-year base it has built and the run during the 2014/16 period prior to that base. Furthermore, given the historical moves we have seen markets make in reaction to the coronavirus, the 2002 high could very well be a conservative view, and at some point a revision in the target may be in order.
For now, in wait-and-see mode as things digest a bit here. Current longs from good prices may want to stick around and see if a breakout can develop. Very short-term-minded traders may look to play a countertrend trade, but will want to stay nimble. Would-be longs may be best served waiting for a good risk/reward entry before becoming too aggressive about bullish bets.
USD/CAD Daily Chart ('may' turn down and take a breather)
USD/CAD Weekly Chart (beyond 2016 high lies the 2002 high)
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---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX
