Canadian Dollar Forecast: USD/CAD Price – Recovery Faces Resistance
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USD/CAD Technical Outlook
Weak US Dollar
Last week, USD/CAD declined to a three-month low at 1.3391 then closed the weekly candlestick in the red with a 2.5%. The US dollar lost value against major currencies due to a lower demand for safe havens caused by the optimism of a quicker economic recovery after many weeks of lockdown.
The Relative Strength Index (RSI) declined to oversold territory emphasizing the strength of bearish momentum.
USD/CAD DAILY PRICE CHART (June 28, 2018 – June 9, 2020) Zoomed Out
USD/CAD DAILY PRICE CHART (March 6 – June 9, 2020) Zoomed In
On May 26, USD/CAD broke below the lower line of the descending triangle discussed in our previous update. Later on, the price generated another bearish signal after failing on multiple occasions in closing above 1.3793. Hence, the pair declined to the current trading zone 1.3291 – 1.3511.
A close above the high end of the aforementioned trading zone reflects a weaker bearish momentum and therefore, the market could rally towards 1.3793. Any further close above that level may extend the rally towards 1.4000.
On the other hand, a close below the low end of the zone signals that bears may press towards 1.3015, and then any further close below that level could send USDCAD even lower towards 1.2900.
See the daily chart (zoomed in) to know more about the key levels to monitor in both scenarios.
USD/CAD four hour PRICE CHART (May 18 – June 9, 2020)
On June 1, USD/CAD broke below the uptrend line originated from the May 27 at 1.3728 and generated a bearish signal. On Friday, the pair broke below the lower line of the descending triangle marked on the chart and generated another bearish signal.
At present, the market trades below the downtrend line originated from the May 22 high at 1.4048 although, any violation of this line would generate a bullish signal.
Thus, a break above 1.3564 may trigger a rally towards 1.3681 on the other hand, any break in the other direction i.e. below 1.3279 could send USDCAD towards 1.3159. Nonetheless, the daily and support and resistance marked on the four-hour chart should be kept in focus.
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.