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Canadian Dollar Technical Forecast: USD/CAD, CAD/JPY

Canadian Dollar Technical Forecast: Mixed, Depending on Counterparty

  • USD/CAD put in a strong move on the back of the US Dollar breakout to fresh yearly highs, with scope for bullish continuation in the pair which would be bearish for the Canadian Dollar.
  • CAD/JPY, however, has pulled back in a strong bullish trend and is nearing a key spot of confluent support around the 90-handle. This could be attractive for those looking for CAD-strength as a bull flag formation has built.
  • The analysis contained in article relies on price action and chart formations. To learn more about price action or chart patterns, check out our DailyFX Education section.
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It was a big week in the FX market as the US Dollar broke out on the back of a strong inflation print. With inflation in the US continuing at a rather brisk pace, the Greenback rallied up to a fresh yearly high and this hit many major currency pairs, USD/CAD included.

I had looked into the matter on Monday of this week, highlighting the progressive build of higher-lows on the four-hour chart that kept the door open for bullish continuation scenarios. That was followed by the Wednesday outlay that prodded the USD higher, and this allowed for USD/CAD to breakout beyond the 1.2500 psychological level.

But that breakout didn’t stop there, buyers continued to push up to the next resistance level at 1.2590, which is the 38.2% Fibonacci retracement of the June-August major move in the pair.

This could be an enticing setup for those looking for CAD-weakness. The higher high combined with higher-lows keeps the door open for bullish continuation in USD/CAD, with support potential around the 1.2478-1.2500 zone of prior resistance.

USD/CAD Four-Hour Price Chart

Canadian Dollar Technical Forecast: USD/CAD, CAD/JPY

Chart prepared by James Stanley; USDCAD on Tradingview

CAD/JPY

There’s a lesson for trend here: When the Japanese Yen imploded around the Q4 open on the back of the higher rates theme, the trends in EUR/JPY, GBP/JPY, CAD/JPY and even USD/JPY offered a minimum of pullback. It was very difficult for trend traders to find an adequate entry as each day was just more and more overbought.

But, a few weeks ago those trends started to look shaky, and I highlighted this when I asked whether those Yen trends were ready to pullback. Three weeks later, those trends still lay in wait.

CAD/JPY could be provocative for this theme, and this could be a favored pair for those looking for CAD-strength to continue. The support zone identified in that article, taken from around the 90.00 handle, appears to be coming closer to being in-play.

But, there’s additional context here, as well, as CAD/JPY has now built a bull flag formation, often followed with the aim of bullish trend continuation. The zone around 90 is very busy, with multiple Fibonacci retracements confluent within a tight area on the chart, including the 38.2% retracement of the recent bullish move plotted at 89.92.

CAD/JPY Daily Price Chart

Canadian Dollar Technical Forecast: USD/CAD, CAD/JPY

Chart prepared by James Stanley; CADJPY on Tradingview

— Written by James Stanley, Senior Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX