USD/CAD Technical Outlook
- USD/CAD rally has a familiar level back into play
- Strong reversals a norm for CAD, good spot to watch for another
USD/CAD Technical Outlook: Watch for Typical CAD Price Action
USD/CAD is trading around the 12950 level, a big level dating back quite some time. It has held up the test of time for the most part since December 2019. The exception is in May when we saw price pop to over 13000.
Currently, USD/CAD is struggling to overcome the 12950 area and if we see this continue then another sharp reversal could be in order soon. This will be highly dependent on whether we also see a turn in stocks, as the 20-day correlation between the S&P 500 is -0.92. This means that USD/CAD and the stock market are effectively trading in lockstep in opposite directions.
With that in mind, if we see stocks (which look short-term oversold) turn higher then USD/CAD is likely to turn lower off resistance. However, further weakness in stocks could mean that resistance is overtaken and that the 13076 level is next up.
If we see this occur, what will become interesting is whether old resistance can become new support on any decline that occurs from over the 12950 area. At some point a broader breakout may develop towards an extended trend higher. This is seen as likely at some juncture with the equity market bear and dollar bull continueing to gain traction.
For now, watching for reversal price action around resistance and taking it from there. Often USD/CAD turns violently and with limited warning, this could be another one of those cases in the near-term.
USD/CAD Daily Chart
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---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX
