Matt Weller, CFA, CMT
Faraday Research
We’ve been tracking the USDCAD consistently over the last two weeks as the pair has struggled to break above key resistance at 1.0985 (see “USDCAD Pressing Critical 1.0985 Barrier Ahead of US Data” and “USDCAD: Short-Term Double Top Activated on Drop Below 1.0900” below for more). In all, bears were able to repel four separate rallies into that barrier, and rates finally dropped below 7-week bullish trend line support in today’s Asian session.
From a technical perspective, bears clearly have the upper hand. The pair put in a large 4hr Bearish Marubozu Candle* as rates broke below the trend line, indicating strong selling pressure and hinting that the USDCAD is likely to head lower today. Meanwhile, the RSI indicator broke below the 40 level, which had provided consistent support throughout the recent bullish run. Further bolstering the bearish case, the MACD indicator is now trending lower below both its signal line and the “0” level, showing clearly bearish momentum.
While rates have stabilized around the 1.0900 handle over the past few hours, an eventual move down to the August low at 1.0860 is favored. Below there, the next levels of support to watch will be the Fibonacci retracements of August’s rally near 1.0845 (38.2%), 1.0800 (50%), and 1.0760 (61.8%). Meanwhile, only a rally back above the strong ceiling at 1.0985 would shift the medium-term bias back to the topside.
A Marubozu candle is formed when prices open very near to one extreme of the candle and close very near the other extreme. Marubozu candles represent strong momentum in a given direction.
Key Economic Data that May Impact USDCAD This Week (all times GMT):
Ø Today: EIA Crude Oil Inventories (14:30)
Ø Thursday: CA Current Account (12:30), US Preliminary GDP and Initial Unemployment Claims (12:30), US Pending Home Sales (14:00)
Ø Friday: CA GDP (12:30), US Core PCE and Personal Spending data (12:30), Chicago PMI (13:45)
This research is for informational purposes and should not be construed as personal advice. Trading any financial market involves risk. Trading on leverage involves risk of losses greater than deposits.
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