USD/CAD Technical Outlook
- USD/CAD trend has been persistent but yesterday put in a pause
- Will the pause have USD/CAD emerging or setting up for more selling?
USD/CAD Technical Outlook: Sell-off Pausing or Reversing?
USD/CAD has been very weak the past month, with very little reprieve since the selling began. Nothing trends straight up or down without a few corrections and pauses along the way. Yesterday’s reversal wasn’t uber powerful, but enough to give pause to the current trend.
It may turn into a consolidation phase that ends up leading USD/CAD lower, that is yet to be seen. Or it could signal that a broader rebound is in play. Either way, it doesn’t appear we have hit a meaningful low yet. If we see bounce develop, 12422 is the first level of resistance to watch.
This is followed up by the 200-day moving average that is in confluence with the September low at 12493. It seems unlikely a bounce to that point will develop given the general strength of the downtrend, but it can’t be ruled out.
Looking lower, should we see only a temporary pause or less (selling commences again immediately), the next major threshold to watch is a trend-line that was born in August 2011. It passes under the late May low. It could offer a meaningful low should it get met, that is currently down around 12130-ish.
From a tactical standpoint, existing shorts may want to tighten up stops with a trailing stop strategy, while would-be shorts may be best served by being patient until a continuation pattern or failing countertrend rally unfolds.
Longs don’t hold much appeal at this time, but countertrend traders could use yesterday’s low at 12288 as a point of reference for stops.
USD/CAD Daily Chart
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—Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX