USD/CAD continues to tread dynamic trendline support, bulls eye 1.33 area
- USD/CAD holds in consolidation as the US dollar attempts the upside, but fails to breakout.
- Fed's forward guidance leaves the US dollar hanging on the balance of improved risk sentiment.
- 1.33 on the cards if there is a bullish breakout of consolidation from dynamic trendline support.
USD/CAD is currently trading at 1.3176 between a range of 1.3127 and a high of 1.3200 in a choppy consolidation of the correction of the daily impulse.
The Federal Reserve event was unable to shake out any spot market dollar bulls that are eager for an upside correction.
We will have to wait to look at data collected since the Fed meeting as for how CTFC positing might have been affected by the event.
However, there was little to encourage a bullish bias for the greenback, given that the Fed consensus suggests that there will be no changes before 2024.
Meanwhile, there was some acknowledgement of improved economic conditions which seemed to have supported the dollar during Fed Chair Jerome Powell's presser – rather counterintuitively though.
CAD hangs in the balance of the US dollar and oil
To date, the view that a reflationary Fed policy has been a dollar negative.
Such a policy should help to support stocks and commodities (CAD is correlated to commodities).
If there is a persistent sense of a recovery, then that should be a weight on the greenback.
Oil breaks $40bbls
As for commodities, the price of oil has been on the march and broke the $40 handle in mid-North American markets on Wednesday as risk appetite improved.
In addition, the latest API data showed a heavy decline in oil inventories, while headlines have also suggested OPEC+ compliance was above 100% for August.
However, if oil now struggles to gain much further ground and if the US dollar dies indeed breakout to the upside, USD/CAD could be sent on its way to the 1.33 handle as per the technical analysis below:
USD/CAD levels
While al of the above points to a stronger Canadian dollar, the technical landscape on the charts remain negative, bullish USD/CAD.
As illustrated here, it has been a difficult environment to stay long of USD/CAD while the price has consolidated in sideways price action in anticipation of a breakout to the upside:
Original setup showed that the price was likely due an upside extension:
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On the 4-hour time frame, however, the price has just moved sideways in the creating of dynamic trendline support:
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At this juncture, bulls may well be trapped, but a break of the current resistance structure will likely lead to the breakout that has been expected.
However, failures at resistance and a break of the trendline support and support structure will invalidate such bullish prospects.
Author
Ross J Burland
FXStreet
Ross J Burland, born in England, UK, is a sportsman at heart. He played Rugby and Judo for his county, Kent and the South East of England Rugby team.
