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USD/CAD Technical Outlook: Rounding the Corner

USD/CAD Technical Outlook: Rounding the Corner

Paul Robinson, Strategist

USD/CAD Technical Outlook

  • USD/CAD stabilizing after pullback was at risk of a reversal
  • Higher levels, retest of trend resistance look to be ahead

USD/CAD Technical Outlook: Rounding the Corner

USD/CAD looked at risk of turning what was anticipated to be a pullback into a full-on reversal of the move coming out of the June Fed meeting. The retracement was a little stronger than anticipated, unlike most other USD pairs that experienced shallow retracements.

However, with price start to turn higher here, risk on the downside is quickly diminishing. That could change, but as long as the recent low at 12252 holds, then the outlook is at least neutral. A break below would have in play a full reversal of the mid-June move and elevated risk of a trend resumption to new cycle lows beneath 12000.

Looking higher, the first major line of resistance is the December trend-line that has several inflection points, with the most recent occurring at the start of last week. It is a solid line of resistance, so getting above it would be a fairly bullish development.

To confirm a breach we need to see a daily close above the June high at 12486. A break above the trend-line and high would have USD/CAD looking towards the next level of resistance that was in play on several occasions from January to April. We’ll call it ~12635.

For now, the trading bias is starting to shape up for higher levels, but not USD/CAD isn’t quite out of the woods yet. Traders who may have entered on this recent pullback should look to the recent low at 12252 for guidance on assessing risk. How price action plays out at aforementioned resistance, should we get to that point, will determine whether it makes sense to hold on for a larger move or not.

For would-be shorts, a breakdown below 12252 would suggest that we will see a full reversal and could decline to new cycle lows below 12000. If the trend-line/June high forces a rejection, then that could offer up a spot for fresh shorts.

USD/CAD Daily Chart

usd/cad daily chart

USD/CAD Chart by TradingView

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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.