Title: USD/CAD Technical Analysis: Loonie Strengthens as Price Dips Below Key Moving Averages
Source: Original article by Greg Michalowski, ForexLive via TradingView
The USD/CAD currency pair has shown signs of weakness in recent sessions as it retreats from previous highs. The pair broke below several crucial technical levels, particularly the hourly moving averages, indicating a loss of bullish momentum and signaling potential further downside in the short term. Traders and technical analysts are now watching for confirmation of continued bearish movement or whether this drop will turn into a temporary correction.
This article expands on the original technical breakdown by Greg Michalowski published on ForexLive and TradingView, integrating analysis from additional sources to provide a comprehensive outlook for USD/CAD. It explores key technical indicators, price action patterns, support and resistance levels, and macroeconomic influences affecting the pair.
Current USD/CAD Price Action
As of the latest trading session:
– USD/CAD has moved decisively below the 100-hour and 200-hour simple moving averages (SMAs), a negative signal for short-term traders.
– The pair is now trading near 1.3540, down approximately 100 pips from recent highs set earlier in the week.
– This decline marks a shift in short-term bias from bullish to neutral/bearish.
Key Chart Technicals
According to Greg Michalowski’s analysis:
– The 100-hour SMA had previously provided support near the 1.3615 level.
– The 200-hour SMA was positioned around 1.3596.
– Breaking below these levels is technically significant because these moving averages often act as dynamic support and resistance.
Once the price dropped below both levels, it attracted additional selling interest, suggesting that bulls might be stepping aside in the near term.
Trend Analysis
Looking at the broader price trend:
– The pair had been trending higher, backed by a strengthening U.S. dollar and weaker Canadian dollar over the past few weeks.
– However, the breakdown below the two moving averages represents a break in the recent trend structure.
– This break could signal the potential beginning of a short or medium-term downtrend.
Technical Indicators
Several key indicators now suggest increased bearish pressure:
1. Moving Averages:
– Price is now trading below the 100-hour and 200-hour SMAs.
– The 50-hour SMA is also starting to slope downward, indicating fading bullish momentum.
2. Relative Strength Index (RSI):
– The RSI on the hourly chart dropped below 50, currently hovering near 40, indicating bearish bias.
– There is no indication yet of oversold conditions, which means more room for downside exists.
3. MACD (Moving Average Convergence Divergence):
– The MACD histogram turned negative, and MACD and signal lines have crossed to the downside.
– Momentum appears to be favoring sellers.
4. Support and Resistance:
– Immediate support sits around 1.3530, a level that held as resistance in early May.
– Below this, further support is seen at 1.3500 and 1.3465.
– Resistance lies at 1.3595 (200-hour SMA) and 1.3615 (100-hour SMA), then 1.3650 if price climbs back above averages.
What This Means for Traders
The breakdown below the hourly moving averages suggests that any recovery attempts may face stiff resistance. From a trading strategy standpoint, here’s how different traders may approach it:
– Short-Term Traders:
– Could look for short positions on rallies towards the 100-hour or 200-hour SMA.
– Use tight stop losses above the 1.3620–1.3650 area.
– Swing Traders:
– May look to hold positions targeting downside to 1.3500 or even 1.3465 depending on momentum.
– Monitoring confirmation with daily chart patterns, especially bearish engulfing candlestick formations.
Read more on USD/CAD trading.