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