Canadian Dollar Price: USD/CAD A Downside Break or More Consolidation?
USD/CAD Technical Outlook
USD/CAD – Reversed Gains
On May 11, USD/CAD rallied and settled above the 1.4000 threshold. On Friday, the market closed in the green weekly candlestick with a 1.3% gain. However, the pair erased the majority of last week’s gains on the first day of this week.
Alongside this, the Relative Strength Index (RSI) crossed below 50, highlighting a possible start of a bearish momentum.
USD/CAD DAILY PRICE CHART (AUG 17, 2018 – May 19, 2020) Zoomed Out
USD/CAD DAILY PRICE CHART (March 25 – May 19, 2020) Zoomed In
Based on the analysis of the daily chart, in late March USD/CAD corrected its uptrend and created a lower high at 1.4349. Afterward, the price traded in a trendless move creating a lower high with a higher low.
Yesterday, the price declined to the current trading zone 1.3793 – 1.4000 and closed below the 50-day moving average generating a bearish signal. Nevertheless, it may require a close below the low end of the aforementioned zone to conclude a stronger bearish sentiment, and this could send USDCAD towards 1.3511. A further close below that level may encourage bears to press towards 1.3291. In that scenario, the weekly support areas and levels marked on the chart (zoomed in) should be considered.
On the other hand, a close above the high end of the aforementioned trading zone could mean a continuation of the current sideways move, and this would possibly push USDCAD towards 1.4320. A further close above that level highlights a bullish comeback and may cause a rally towards 1.4634. Having said that, the daily and weekly resistance levels underscored on the chart should be kept in focus.
USD/CAD four hour PRICE CHART (April 13 – May 19, 2020)
Looking at the four- hour chart, on April 28 USD/CAD broke below the uptrend line originated from the April 13 low at 1.3856. On May 6, the price rebounded from this line then reversed lower producing a bearish signal. Today, the pair broke below the uptrend line originated from the April 30 low at 1.3850 eyeing a test of the low end of the current trading zone discussed above on the daily chart.
A break below 1.3724 could send USDCAD towards 1.3600. Although, the weekly support level underlined on the chart should be watched closely. In turn, any break in the other direction i.e. above 1.4180 may trigger a rally to the 1.4300 handle. Nonetheless, the weekly support level printed on the chart should be monitored.
See the chart to find out more about the key technical levels in a further bullish/bearish scenario.
Written By: Mahmoud Alkudsi, Market Analyst
Please feel free to contact me on Twitter: @Malkudsi
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.