Talking Points for Canadian Dollar, CAD, USD / CAD:
- USD / CAD is setting a new record two weeks ahead of FOMC pricing decision.
- This scenario was reviewed in the previous week’s analysts choice, focusing on USD/GOUJAT strategies for USD force scenarios.
- After an aggressive sell-off in the first three weeks of the New Year, an apparent pressure has started which could turn into something more.
- The analysis contained in the article is based on Price action and graphic training. To learn more about price action or chart patterns, check out our DailyFX Education section.
It was a quick start to the day in USD / CAD as the pair hit a new two-week high, temporarily testing above the 1.2800 level ahead of the FOMC rate decision. And that comes after the USD / CAD hit a really big level last week at 1.2622, which is the 50% marker of a major long-term move from 2002 to 2007.
As we saw in the previous week’s analyst picks, this shift in support at the end of last week led to the construction of a morning star pattern, which is often discussed with the aim of bullish reversals. And that came with some other longer term training, as a falling wedge had formed over the past two months. The falling wedge is approached similarly for the purpose of bullish breakthroughs.
USD / CAD Daily Price Chart
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Can bulls go through the FOMC?
While some CAD weakness has certainly contributed to the topspin movement so far, the determinant of the distance or duration of that stretch is likely to revert to the US dollarand if this theme of strength can continue. And the driving force behind that will likely be determined by two dominant forces, and those are both from the central bank as the Fed moves into its January rate decision later today, on the heels of some comments. interesting on the European Central Bank. . While the ECB had previously been little worried about euro appreciation, yesterday’s report of an ongoing study to investigate the matter raised some eyebrows.
And given the aggressiveness of this short chart on the USD over the last eight months of last year, there could be more pressure on the horizon and this could further support the supply on the USD. . USD / CAD may remain one of the most attractive places for such themes, and the big area of interest for resistance potential is around this earlier support area, ranging from 1.2952-1.3000. This area has provided multiple inflections of support over the past few years and more recently provided some resistance in late December before the pair fell to a new two-year low.
But this key area has yet to appear in 2021 trading and if this bullish theme in USD and USD / CAD continues, it could be an attractive spot on the chart to follow.
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USD / CAD Weekly Price Chart
Graphic prepared by James stanley; USDCAD on Tradingview
— Written by James stanley, Strategist for DailyFX.com
Contact and follow James on Twitter: @JStanleyFX