USD/CAD Technical Overview: Stuck in a Channel Below Long-term Support
USD/CAD Technical Outlook
- USD/CAD continues to trend lower inside channel structure
- The weak price action is occurring below long-term support
- Trading bias remains tilted lower in the absence of aggressive buying
USD/CAD vulnerable to further losses
USD/CAD continues to show weakness within an intermediate-term channel structure below long-term support, which suggests that lower levels lie ahead. For some background, the pair broke below the 2009 high, which became influential at times over the past few years.
The last hold of the 13000-line was back in September, where a rally only resulted in a corrective bounce within the downtrend off the March spike-high. The minor test in November lasted only briefly before USD/CAD finally lost the long-term threshold last month. It was briefly tested just prior to Christmas, but confirmed as a former level of support now turned resistance.
This kept the channel structure since early November developing as well. With the channel in play and the absence of any strong buying efforts, the bias at this time is towards seeing lower levels. The bottom of the channel could offer minor support in the mid-12400s, but isn’t viewed as meaningful given the overall trend.
Pulling back to the long-term chart (monthly), there isn’t any substantial price support until the late 2017 and early 2018 lows. This ranges from 1.2061 (2017 low) up to 1.2247 (2018 low). This means there may be a fair amount more of downward pressure before we see a meaningful rally develop.
To negate this bearish outlook, some work is needed. First, the intermediate-term channel will need to be snapped by price crossing above the upper parallel, but then that will ultimately need to be followed by a firm recapturing of the 13000-line.
USD/CAD Monthly Chart (below long-term support)
USD/CAD Daily Chart (firmly inside channel)
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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.