Technical Bias: Neutral
Key Takeaways
• US dollar continues to struggle against the Canadian dollar despite strong labor data.
• USDCAD pair testing long-term trend line, and struggling to hold the same.
• USDCAD support seen at 1.0620 and resistance ahead at 1.0720.
The Canadian dollar managed to correct against the US dollar this past week and moved closer to an important support area. A break lower might call for more and sustained losses in the USDCAD pair.
Trend Line Proved Worth?
There is a critical bullish trend line on the weekly timeframe for the USDCAD pair, which was also highlighted in one of the previous analyses. The pair recently fell sharply and tested the highlighted trend line. However, the pair seems to be struggling to hold the trend line, but unless it closes below the same, we cannot consider it as a break. The chance of a bounce from the current or a bit lower levels is quite high, as the fundamentals do not support for more gains in the Canadian dollar. The current signals are mixed, as the pair has closed below the 50-weekly simple moving average, which is a bearish sign. On the other hand, the trend line also coincides with the 38.2% Fibonacci retracement level of the last major leg higher from the 0.9629 low to 1.1279 high, which increases the importance of the trend line. So, one should wait for the pair to either bounce or break the trend line before jumping into a trade. A break lower might take the pair towards the 50% fib level where buyers could be tested, followed by the 200-weekly SMA.
Alternatively, if the pair bounces from the trend line support area, then it might face resistance around the broken 50-weekly SMA. However, a critical resistance lies around the 1.0850 area, which acted as a support earlier and might act as a resistance moving ahead.
Overall, as long as the pair does not close below the trend line the chance of a bounce is quite high.
