USDCAD, Weekly
After running higher for the latter part of year 2014 USDCAD created a topping formation between January and the beginning of April. Since then we have seen a return rally that failed at this same topping formation and. Just two weeks ago the pair created a lower weekly high with a Doji candle that since then has also become a pivotal candle. This coincided with the rising regression channel bottom. The pair has rolled over from the resistance and Stochastics indicator has followed the lead. It looks like it will move below its signal line should the price close lower this week. Bollinger Bands are still a bit far in both directions suggesting that price action is taking place very much in the middle of the range. Price has also closed above a descending trendline (drawn from March high downward) and has since found support from the same trendline. As a result price is now trading between 1.2409 resistance and 1.1919 support created by the low end of the topping formation and a weekly pivotal candle below the current price. Additionally, the 38.2% retracement and lower Bollinger Bands coincide with this region. The next resistance level is the weekly pivotal candle high at 1.2563. It seems likely the over the coming weeks price action will be tied to a range between the 1.1919 support and 1.2563 resistance. Over the long term (next 12 months) the USD might have the upper hand as the Fed is expected to normalize the rates and even if it would take longer than current expectations (Q4 2015) suggest the US Fed would still be the central bank that is nearest to the beginning of the beginning of rate hike cycle.
USDCAD, Daily
The pair has found support around the 50% retracement level that also coincides with lower Bollinger Bands and 50 day SMA. Should this support fail the next interesting area is a Fibonacci cluster at 1.2142 – 1.2173. This area acted as a resistance area in May and is therefore likely to now have a reversed role. It also coincides with a weekly pivot candle high at 1.2144 and should therefore be a fairly strong area of support. A Doji candle two days ago indicates reversal and suggests that price will next move lower and test the support levels again.
Support levels: 1.2167, 1.2006 and 1.1919. Resistance levels: 1.2439 and 1.2564.
USDCAD, 240 min
USDCAD has been moving sideways since June 11th and has been capped by 38.2% retracement level and a resistance at 1.2366 which price almost touched on June 15th. Since then price has been moving slightly lower and making lower highs. Also price has been shying away from 50 period moving average. This suggests lower prices and increases possibility that price will retest support levels at and below 1.2200. But before that the pair needs to break an intraday support that coincides with 23.6% retracement level.
Support levels: 1.2284 and 1.2000. Resistance levels: 1.1.2339, 1.2366 and 1.2449.
Conclusion
USDCAD has bounced from a support but the lack of momentum and the distance to the major support levels (1.2000) suggests that the pair will move lower before finding support. The bigger picture suggests sideways market over the coming weeks between 1.1919 and 1.2563 and in longer term (12 months) the USD should be the one benefitting from the fact that from the world central banks Fed is closest to starting rate normalization. For short term I am looking for this pair to move down to 1.2000 and look for buying opportunities at major support levels and shorting opportunities at significant resistance levels.
Janne Muta
Chief Market Analyst
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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.
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