Technical Analysis of USD/CAD Price Movements

EnclaveFX Ltd
Aug 08, 2023

The USD/CAD currency pair has recently experienced a pause in its movement, encountering a notable resistance marked by the 61.8% Fibonacci retracement level, derived from the decline observed between May and July. Despite this temporary halt, the technical landscape suggests a potential for further short-term appreciation.

A pivotal shift occurred when the 50% Fibonacci level was breached, accompanied by a subsequent push beyond the significant 1.3400 mark, which aligns with the 100-day Simple Moving Average (SMA). This sequence acted as a fresh impetus for bullish sentiment. Adding to the positive outlook, the daily chart's oscillators remain comfortably situated in the positive territory, avoiding overbought conditions.

Yet, a nuanced analysis reveals that caution is warranted. The Relative Strength Index (RSI) on the 1-hour chart is at the brink of crossing the 70 threshold, which historically indicates potentially overbought conditions and might restrain traders from initiating fresh bullish positions around the USD/CAD pair. Consequently, a judicious approach involves waiting for additional follow-through buying beyond the 1.3435 area or a period of intraday consolidation before considering further gains.

Despite these nuances, the current trajectory of spot prices remains aligned with an extended recovery from the Year-To-Date (YTD) low witnessed in July, with a target of reclaiming the psychological 1.3500 mark.

On the opposing side, the 1.3400 level, guarded by the 100-day SMA, serves as immediate support against potential downside movements. If breached, attention shifts to the 50% Fibonacci level within the 1.3375-1.3370 range. Additional support zones are located around the mid-1.3300s and the 1.3300 level (38.2% Fibonacci level). Further declines are anticipated to encounter buying interest around the 1.3250 horizontal support, and a more confined downside could be seen around the 1.3225 regions, corresponding to the 23.6% Fibonacci level.

Should selling pressure persists, the positive bias would be invalidated, potentially pushing the USD/CAD pair beneath the 1.3200 mark. This scenario could trigger an accelerated descent towards the 1.3160-1.3150 intermediate support before potentially challenging the psychological 1.3100 level.

In summary, the technical analysis of USD/CAD price trends reveals a nuanced landscape marked by potential bullish momentum, while attention to key support and resistance levels remains crucial for informed decision-making.


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