News & Analysis

COTD: USDCAD – Finally! A Breakout of the Descending Channel

September 9, 2020
USDCAD – 4HR

USDCAD –

As news of increased Coronavirus cases in the US dominates the headlines, coupled with falling global oil prices, USDCAD has been a formidable one to analyse in recent times. However, we are finally starting to see some exciting moves in the pair, making it a clear choice for our Chart of The Day.

Firstly, USDCAD has somewhat stagnated into a descending channel for the past two months, with Dollar bulls failing to materialize any convincing moves to the upside until now. On the 4hr chart above, we can see several consecutive bullish candles, but most importantly, a definite break out of the bearish channel above the 1.3140 level and rising still.

One element that stood out previously was the distance price action had fallen below the 200-day moving average (gold line). Despite the recent attempts by bulls to challenge the trend, the longer-term picture still leaned towards a more bearish scenario. That could all be about to change as we witness the pair testing this all-important indicator during the next few sessions.

I suspect the 1.3140 level or upper parts of the channel may become a new support level in the short-term. We could even see the current 200 MA act as strong resistance during this initial test, with price rebounding back toward the current weekly pivot point of 1.3075 before challenging higher ground once more.

Another reason I suggest this idea is due to the present overbought status of the RSI indicator that hints at a potential reversal. We would typically look for a dip in this indicator, followed by a quick retrace to overbought levels as a makeshift gauge of the US Dollar’s overall demand.

Without any significant news releases scheduled for either currency during upcoming sessions, price action may utilise the technical levels instead of the fundamentals to catalyse short-term moves—definitely one to watch.

 

Note: Click on charts to enlarge.

 

By Adam Taylor CTEe

.@adamt_trading

Sources: Go Markets, Meta Trader 5, TradingView, Bloomberg

Disclaimer: The articles are from GO Markets analysts,  based on their independent analysis or personal experiences. Views or opinions or trading styles expressed are of their own;  should not be taken as either representative of or shared by GO Markets.  Advice (if any),  are of a ‘general’ nature and not based on your personal objectives, financial situation or needs.  You should therefore consider how appropriate the advice (if any) is to your objectives, financial situation and needs, before acting on the advice.  If the advice relates to acquiring a particular financial product, you should obtain and consider the Product Disclosure Statement (PDS) and Financial Services Guide (FSG) for that product before making any decisions.

Next:
Previous:

Let's Get Started with GO Open a Live Account Try a Free Demo