Canadian Dollar Forecast: USD/CAD Bounces from Oversold
USD/CAD, Canadian Dollar Talking Points:
- After a consistent up-trend through May and much of June USD/CAD has been in a decisive sell-off for the past month and change.
- That sell-off produced oversold conditions on the daily chart, and a strong bounce today is opening the door for a cross back above the 30-level via RSI.
Sellers have been in-control on USD/CAD for the since the breakdown at 1.4150 support in mid-July, and this pushed the pair into oversold territory on daily RSI for the first time since January, which was followed by a strong bullish push that eventually led to the break back-above the 1.4000 handle. This comes after a dramatic weekend of headlines around tariffs between the U.S. and Canada, with the Canadian Dollar being punished on the prospect of more trade restrictions.
At this point, however, it’s difficult to separate what’s a short squeeze and what’s legitimate buying pressure on the back of the fundamental implication of this weekend’s events. From a price action perspective, a move of this nature must be respected but on the same token it’s still early if looking for a prolonged bullish continuation scenario.
USD/CAD Daily Chart with recent RSI Crosses
Chart prepared by James Stanley; data derived from Tradingview
USD/CAD: For Short-Term Confirmation
At this point the four-hour chart already shows a resistance test at prior support. But for this rally to continue we’re going to need to see bull show up at a higher-low to confirm topside continuation potential.
For that, there’s prior price action points of interest at 1.3795, 1.3756 and 1.3732. And, for next resistance, it’s the swing at 1.3908 that stands out as this was a spot of support-turned-resistance as the sell-off was unfolding.
USD/CAD Four-Hour Chart
Chart prepared by James Stanley; data derived from Tradingview
--- written by James Stanley, Senior Market Analyst, Global Macro
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