USD/CAD Flirting with YTD Lows near 1.3050 – Will it Break Down?
Matt Weller, CFA, CMT July 12, 2019 10:43 AM
Technically speaking, USD/CAD continues to trend lower within a bearish channel, though there are some signs that the pair may see a short-term bounce.
The greenback is near the bottom of the relative strength charts for the third day in a row as traders rush to (re)price in the potential for multiple interest rate cuts from the Federal Reserve this year. Meanwhile, the loonie has maintained its strength from the first half of the year, despite BOC Governor Poloz striking a slightly cautious tone on the Canadian economy earlier this week. One factor supporting Canada’s currency has been the recovery the country’s most important export, with WTI crude oil trading at a 7-week high above $60.00.
Technically speaking, USD/CAD continues to trend lower within a bearish channel, though there are some signs that the pair may see a short-term bounce. For one, rates are testing a key support zone near 1.3050, an area that USD/CAD hasn’t traded below since October. At the same time, the secondary indicators (RSI and MACD) are both showing possible bullish divergences, signaling that the selling pressure may be waning as rates test support.
Source: TradingView, FOREX.com
While the technical setup suggests an elevated risk of a short-term bounce next week, the fundamental factors (and longer-term technical downtrend) both continue to point lower for now. Therefore, bulls looking to play a potential bounce should be nimble as bearish traders may look at rallies toward the top of the channel as an opportunity to join the downtrend at a favorable price.
At this point, a break and close below the 1.3050 zone could open the door for a continuation toward 1.2900, if not lower, next.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.