USD/CAD Price Analysis: Falling wedge breakout supports prospects for additional gains
|- A combination of factors assisted USD/CAD to gain strong positive traction on Monday.
- The momentum assisted the pair to confirm a bullish breakout through the falling wedge.
- Mixed oscillators on hourly/daily charts warrant caution before placing aggressive bets.
The USD/CAD pair built on its recent bounce from multi-year lows, around the 1.2630 region and gained strong positive traction on the first day of a new trading week. The momentum pushed the pair further beyond a short-term descending trend-line resistance, confirming a near-term bullish breakout through a falling-wedge chart pattern.
Meanwhile, technical indicators on hourly charts have been gaining positive traction and support prospects for additional gains. Hence, some follow-through strength beyond the 1.2800 mark, towards testing 200-period SMA on the 4-hourly charts, looks a distinct possibility. The mentioned barrier is pegged near the 1.2830 region.
A stronger USD and a pullback in crude oil prices add credence to the positive outlook. That said, oscillators on the daily chart – though have been recovering from the negative territory – are yet to confirm the bullish bias. This might hold bulls from placing aggressive bets and keep a lid on any further gains for the USD/CAD pair.
This makes it prudent to wait for a sustained move beyond the 1.2830 region before confirming that the pair has bottomed out in the near-term and positioning for any further appreciating move. The USD/CAD pair might then aim to reclaim the 1.2900 round-figure and climb further towards the next relevant hurdle near the 1.2955-60 region.
On the flip side, any meaningful slide is likely to find decent support and attract some dip-buying near the wedge resistance breakpoint, around the 1.2720-10 region. Failure to defend the mentioned resistance-turned-support might prompt some technical selling and accelerate the fall back towards the 1.2675-70 congestion zone.
USD/CAD 4-hourly chart
Technical levels to watch
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