technical analysis USDCAD

Technical analysis of USDCAD

The US dollar made some gains against its Canadian counterpart in the second half of March as yields from benchmark decade Treasury bonds remained high. Now it looks as though participants have discounted last night’s generally dovish message from the Federal Open Market Committee and sentiment remains relatively strong on the greenback. This technical analysis of USDCAD looks at the daily chart.

There is no very clear high resistance on this chart, but we can probably point to C$1.30 as being an important round number that might resist testing if the dollar gains momentum. To the downside, the latest low slightly below $1.24 is likely to remain in focus.

Technical indicators on USDCAD D1


Moving averages continue to give a sell signal, with each of the 50, 100 and 200 SMAs successively below slower lines. However, the price closed above the 50 SMA yesterday, so the current value area between this and the 100 SMA might be a zone of consolidation as participants await some new driver from data or the outlook for monetary policy.

There is currently no overbought signal from either Bollinger Bands (50, 0, 2) or the slow stochastic (15, 5, 5). The latter at about 62 is slightly closer to neutral than overbought. Volumes though suggests an increase in buying, with buying volume overall dominating selling since February.

Price action and Fibonacci


The channel down starting from around 21 January has still not clearly been broken to the upside. However, the traditional signal from the pattern, buy, seems to be valid based on the context of fundamentals. This seems to be supported by the strong bounce from the low and oversold on 18 March.

Price is now back inside the 38.2% area of the weekly Fibonacci fan, which for bulls opens the door to medium-term targets at the 50% fan around $1.275 over the next few weeks. The 100% weekly Fibo retracement – full retracement of all the greenback’s gains in March 2020 – is likely to be a key resistance, especially because it comes just below the next important psychological area of $1.30.


Technical analysis of USDCAD: summary


Overall the technical picture for dollar-loonie is somewhat less negative than this time last month but still does not favour buying. One of the core principles of TA is that a trend is active until there’s evidence that it has ended. The evidence in this case might be a daily close above $1.265, which would be a new short-term high. Equally, tomorrow’s range of Canadian employment data from 12.30 GMT might shift the impression from charts significantly.

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