USD/CAD Technical Outlook
- USD/CAD trading towards the yearly high, anticipated to break it
- Dollar higher, stocks lower theme expected to persist and even strengthen
USD/CAD Technical Outlook: Poised to Keep Trending Higher
USD/CAD continues to trade higher out of the descending wedge I examined not long ago, and on that the yearly high becomes the next focus. The 13223 level isn’t special other than it is the current yearly high, but breaking it will likely keep a bid in it.
At some point it is anticipated that the 3 steps forward, 2 steps back sequence will get snapped in favor of a cleaner trend with greater momentum. The catalyst for this change is likely to come from an accelerating dollar and deepening of the bear market in stocks.
Stocks look to have put in a peak recently when the S&P 500 turned sharped lower from around the 200-day MA, a threshold seen as a potential capper on the summer rally / corrective bounce. If this outlook matures then we will likely see USD/CAD not only maintain a bid but accelerate higher.
It could still be bumpy before this happens and until we see full signs that USD/CAD is wanting to change this overlapping price behavior I will continue to treat it as it has behaved. This means employing a buy-the-dip mentality over chasing strength.
The recent low at 12895 should hold as a higher low in this current move, with a move above 13100 possibly bringing another shake-out as new highs have typically done. But keep an eye out on general risk trends, because if a big dollar-on, risk-off theme grows as anticipated then USD/CAD could quickly change towards a momentum vehicle and an FX way to play stock market weakness.
USD/CAD Daily Chart
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---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX
