USD/CAD Price Analysis: Buying tails at 20-EMA warrants a resumption of rally
- The 20-EMA at around 1.3080 has acted as major support for the counter.
- The dismal market mood is supporting the greenback bulls.
- The asset may test October high at 1.3978 after overstepping the round-level hurdle of 1.3900.
The USD/CAD pair is attempting to re-test the critical hurdle of 1.3811 as the risk-off market mood has strengthened further. S&P500 futures have escalated their losses in Tokyo after two consecutive bearish trading sessions, which indicates that the risk aversion theme will stay for a while.
This has also infused fresh blood into the US dollar index (DXY), which has overstepped the round-level resistance of 113.00 in Asia. Also, the 10-year US treasury yields haven’t shown any sign of exhaustion despite a juggernaut rally to near 4.23%.
On a daily scale, the asset has remained in the grip of bulls after breaching the upward-sloping trendline placed from May 12 high at 1.3077. The formation of buying tails after a correction to near the 20-period Exponential Moving Average (EMA) at around 1.3680 indicates that the corrective move is concluded now and the asset will resume its upside journey.
Also, the upside trending 50-EMA at 1.3445 indicates that the upside bias is intact.
The Relative Strength Index (RSI) (14) tested 40.00-60.00 after remaining in the bullish range of 60.00-80.00. A conclusion of the corrective move may drive the momentum oscillator again into the bullish range.
Going forward, a break above Wednesday’s high at 1.3810 will send the asset toward the round-level cushion of 1.3900, followed by the previous week’s high at 1.3978.
On the contrary, a decisive drop by the asset below the round-level support of 1.3700 will drag the asset toward October 6 low at 1.3565. A breakdown of the latter will bring further weakness in the asset towards October 5 low at 1.3504.
USD/CAD daily chart
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Author
Sagar Dua
FXStreet
Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.
