USD/CAD Technical Outlook
- USD/CAD explosion at first looked sustainable
- The pullback we are seeing brings serious doubt on a continuation trade
USD/CAD Technical Outlook: Retracement or Reversal?
USD/CAD shot out of a cannon last week after putting in an extremely tight period of trading. The rally at first glance looked good for at least a continuation trade after a period of digestion, but that has been brought into serious question with the sharp retracement we have seen.
Yesterday, a minor reversal developed that could help floor the decline, but if we see price sink much further, then the larger than expected pullback has likely morphed into what will be a full reversal and potentially a leg towards a new cycle low.
The trend-line dating to the peak of a bounce in December has gained quite a bit of meaning during this process. If USD/CAD can solidify here and turn higher, the trend-line and the recent high at 12486 becomes a pair of thresholds to watch. It seems a period of digestion for now is the best case scenario for a bullish outlook.
On the downside, if a slide continues below yesterday’s low at 12252, then the top of the range it broke out of will become the next area of support at 12142. At that juncture a bounce may develop, but the risk is that a new cycle low below 12000 will unfold.
For now, in wait-and-see mode. If USD/CAD can firm up here then perhaps the top-side is still in play, but if it doesn’t then the rally out of the Fed meeting is likely to reverse and possibly worse.
USD/CAD Daily Chart
Resources for Forex Traders
Whether you are a new or experienced trader, we have several resources available to help you; indicator for tracking trader sentiment, quarterly trading forecasts, analytical and educational webinars held daily, trading guides to help you improve trading performance, and one specifically for those who are new to forex.
---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX