US Dollar Remains At Risk Versus The Canadian Dollar

Technical Bias: Bullish

Key Takeaways

• Canadian dollar failed to hold ground against the US dollar during this past week.

• Oversold conditions suggest a short-term correction likely in USDCAD.

• USDCAD support seen at 1.0750 and resistance ahead at 1.0830.

The US dollar surged higher during this past week against most of its counterparts, including the Canadian dollar as the economic data continues to impress the market.

Technical Analysis

There was a monster bearish trend line formed on the 4 hour chart for the USDCAD pair, which was breached on last Friday. The best part is that the USDCAD pair has breached the 50 and 100 simple moving averages (SMA) – 4H, which points to more gains in the coming days. However, the RSI on the 4 hour timeframe is around extreme levels, which means there can be a short-term correction. Initial support can be seen around an important confluence area of the broken trend line and 50 SMA (4H) at 1.0750. The mentioned level acted as a resistance earlier and likely to act as a support in the short term. 

If the pair breaks the 1.0750 level, then a test of the 100 SMA (4H) might be on the cards. Any further losses should be limited considering the current market sentiment. On the other hand, if the USDCAD pair moves higher from the current or a bit lower levels, then initial resistance can be seen around the 61.8% Fibonacci retracement level of the last drop from the 1.0959 high to 1.0621 low. 

US Services PMI

Today during the NY session, the US Services Purchasing Managers Index (PMI) will be released by Markit Economics. The forecast is slated for a rise from 61 to 61.5. If the outcome stays in line with expectation, then more gains in the US dollar are possible. Alternatively, a short-term correction is very likely moving ahead.