USDCAD, Weekly
In the beginning of this year I suggested that the USDCAD pair will move beyond the high of 1.2793. This resistance penetration took place in July and since then the pair has created a higher low almost at the same level. Now USDCAD has been once more facing an area that is a previous high. In the weekly picture price has bumped into resistance at higher Bollinger Bands while the ascending regression channel low wasn’t too far either. The Stochastics are almost in the overbought area and therefore support the idea that the bullish momentum is, at least temporarily, fading.
USDCAD, Daily
The pair has created a wedge formation below the weekly high while yesterday’s candle was a bearish pin bar (a shooting star) and was quickly followed by a sell off. This move brought price below 1.3300 level that supported price over the last two days. At the time of writing price is getting near a pivotal support at 1.3223, a level that coincides with an upward sloping trendline. The next support is at 1.3194 while the resistance area is between 1.3300 and 1.3374.
As Canadian economy is strongly oil dependent the price of crude oil and the USDCAD have an inverse relationship. Crude oil is at a support area (37.50 – 40.00) created by a pivotal candle from August. If downside in crude oil is limited then the upside in USDCAD in near term should be limited as well.
USDCAD, 240 min
There is a pretty clearly defined wedge in the 4h chart as well. A projection based on the width of the formation (dotted arrow) points to the proximity of 61.8% Fibonacci retracemen but there is a significant support at 1.3220 which could turn the price higher before it can hit this projection. Price is currently trading at a support area created by 38.2% Fibonacci level and a pivot candle from November 12th. The 4h resistance area is between 1.3323 and 1.3370.
Conclusion
The proximity of the upper weekly Bollinger Bands and previous high at 1.3457 together with a shooting star candle in the daily timeframe suggest there’s weakness ahead. The fact that crude oil is near previous lows (a pivotal low at 37.50 – 40.00) supports the view. Therefore it makes sense to look for shorting opportunities should the price rally higher (to 1.3300 – 1.3374 range) from the current support. Short term traders might also consider engaging the long side but considering the bearish technical factors in the weekly and daily timeframes the upside might be limited. Therefore price advances might run into considerable resistance between 1.3300 and 1.3370. Due to rising trendline and a pivotal low coinciding near 1.3220, 1.3220 – 1.3240 could work as a short target should the price first rally into the resistance and reversed lower. Traders have different price objectives but whether they are looking for a quick intraday gain or a swing trade they should look for buy signals at support and sell signals at resistance areas as defined in this analysis report.
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About Janne Muta, HotForex’s Chief Market Analyst
Janne Muta is a seasoned industry professional with over 16 years experience in the global markets. Originally from Finland, Janne has worked for institutions in both Helsinki and London as an institutional fund manager, global market analyst and FX educator.
Traders and fund managers from around the world have benefited greatly from Janne’s technical analysis methods. The indicators and price action based trading models he has developed, have, after rigorous testing, proven to be invaluable in identifying high probability trades.
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