Technical Analysis of USD/CAD Price Movements

profile-image
EnclaveFX Ltd
Aug 08, 2023
invoices

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.

Disclaimer

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell these assets. You should do your own thorough research before making any investment decisions. EnclaveFX Ltd does not in any way guarantee that this information is free of mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in the Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses, and costs associated with investing, including the total loss of principal, are your responsibility.

EnclaveFX Ltd and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. EnclaveFX Ltd and the author will not be liable for any errors, omissions, or any losses, injuries, or damages arising from this information and its display or use. The company is not responsible for errors or omissions.