Title: USD/CAD Technical Analysis: Sellers Fall Short of Target in Corrective Move Lower
Source: Based on an article by Greg Michalowski from ForexLive, augmented with additional information and analysis.
The USD/CAD currency pair has been closely watched by forex traders in recent sessions as it demonstrated a notable corrective move lower. After reaching multi-month highs, the pair began to retreat due to shifting risk sentiment and declining oil price volatility. However, USD/CAD sellers recently failed to drive the currency pair all the way to a key technical target, signaling potential exhaustion in bearish momentum.
This analysis revisits the recent USD/CAD price action from both a technical and fundamental perspective, highlighting key support and resistance levels and what traders should look out for in the coming trading sessions.
Overview of Recent Price Action
– The recent high for USD/CAD was established at 1.3795 on April 17, which marked the highest level since November 2023.
– Since that high, the pair corrected downward, bottoming out near the 1.3600 level.
– Sellers attempted to push the pair further below this level to approach the 50% Fibonacci retracement support of the March low to April high range.
– However, bearish momentum lost steam prior to hitting that technical target, leading to a rebound back above short-term support.
Technical Levels to Watch
The price action around key Fibonacci levels, moving averages, and previous highs and lows reveal several zones of interest for traders:
Key Resistance Areas:
– 1.3795: This is the recent peak and remains a key resistance to the upside. If the pair surpasses this level, it would signal renewed bullish control.
– 1.3750-1.3765: Minor resistance was tested in recent rebounds and may serve as an interim ceiling.
– 1.3800+: Round-number psychological barrier that coincides with early November 2023 highs.
Key Support Areas:
– 1.3600: Current swing low and a major psychological support level.
– 1.3575: Confluence of short-term moving average support and the 38.2% Fibonacci retracement.
– 1.3535: The midpoint (50% Fibonacci retracement) of the March to April rally, which sellers failed to reach in the latest move.
– 1.3500: A psychologically significant level that acted as resistance in late March and early April.
Moving Averages in Focus
– 100-hour Moving Average (MA): Currently provides short-term dynamic resistance and is keeping the upside in check.
– 100-day MA: Located around 1.3565, acting as a mid-range support and a key pivot area.
– 200-day MA: Near 1.3475, and would represent strong longer-term support if tested.
Trend Context: Corrective Move vs. Reversal
The most recent move lower from 1.3795 to 1.3600 represented a 195-pip drop. This move had characteristics of a technical correction within a broader uptrend, especially considering:
– Sellers failed to reach the key 50% retracement at 1.3535.
– RSI (Relative Strength Index) showed divergence, where price made lower lows but RSI started rising, indicating weakening bearish momentum.
– Price has remained above the 200-day moving average since mid-March, maintaining the medium-term bullish structure.
As such, the move lower is being interpreted by analysts as a pause or breather in the current uptrend, rather than the beginning of a sustained bearish phase.
Fundamental Drivers Behind USD/CAD Price Action
Beyond technicals, macroeconomic indicators and fundamentals have played a major role in influencing the exchange rate movements.
1. US Dollar Strength
– The US dollar has seen varying degrees of strength in recent months, driven by sticky inflation readings and resilient economic data.
– Recent comments from Federal Reserve officials pushed back against the possibility of near-term interest rate cuts,
Read more on USD/CAD trading.