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USD/CAD Forecast: Flirting with bull breakout

Omkar Godbole FXStreet Contributor

The USD/CAD is now flirting with the falling channel hurdle (top end), having rallied yesterday for the third straight day.

Daily chart

At press time, the currency pair is trading at 1.31, and the channel resistance is located at 1.3108. The 5-day and 10-day moving averages (MAs) are trending north, signaling a short-term bullish setup. The 50-day, 100-day, and 100-day MAs are also aligned in favor of the bulls and so is the 14-day relative strength index (RSI).

As a result, the pair looks set for a rally toward the yearly high of 1.3386 set in June upon acceptance above the falling channel hurdle of 1.3109.

Moreover, a bull breakout would mean the pullback from the June highs has ended and the rally from the April 17 low of 1.2527 has resumed.

Further, the long-term technical charts are favorably disposed toward the CAD bears.

Monthly chart

As seen in the above chart, the pair created a long-tailed candle last month, highlighting a strong dip demand below the upper end of the flag pattern (now acting as a support).

More importantly, it has ensured that the bullish view put forward by the bull flag breakout, ascending 5-month and 10-month MAs and the bullish crossover between the 50-month and 200-month MAs is not negated.

Hence, it seems safe to say that for the USD/CAD pair, the path of least resistance remains to the upside and a falling channel breakout on the daily chart, if confirmed, would only bolster the bullish setup on the monthly chart.

An upside break of the falling channel seen in the daily chart would open the doors to the immediate resistance lined up at 1.3386, which if scaled, would allow extension of the rally to1.3598 (December 2016 high).

Meanwhile, on the downside, a monthly close below the ascending (bullish) 50-month MA, currently located at 1.2827, would abort the long-term bullish view.

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

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USD/CAD Forecast: Flirting with bull breakout

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