CANADIAN DOLLAR PRICE OUTLOOK:
- USD/CAD broke beneath crucial support earlier this week, opening the door to further weakness
- The greenback stands on shaky footing as monetary policy looks to remain accommodative and politicians in Washington discuss further covid-related stimulus
- Further still, IG client sentiment reveals USD/CAD could fall further since retail traders remain net-long
USDCAD Freshly Updated Charts
Weekly shows two targets. The first target is at 1.25229 – 46 pips above the current position; the second target is at 1. 26687 – 187 pips above the current position. The rsi is in the sell zone and appears it is headed down to the buy zone, however the overall direction is up for this pair in this time frame.
Daily shows three targets. The first target is at 1.24925 – 11 pips above the current position; the second target is at 1.26013 – 116 pips above the current position and the third target is at 1.26687 – 183 pips above the current position. The rsi is below the sell zone and appears headed down to the buy zone, however the overall direction of this pair is up and it should start moving up shortly and hit targets. Confirmation of this pair heading up is needed before placing a buy trade in this time frame.
USDCAD in the news
CANADIAN DOLLAR PRICE FORECAST: WILL USD/CAD WEAKNESS PERSIST?
The US Dollar has bled lower for months in the wake of its initial surge during the early days of the coronavirus pandemic. With the Fed committed to maintaining its accommodative stance and talks of further fiscal stimulus taking place in Washington, the case for further USD weakness can be made. On the other hand, a healing global economy has seen sectors like energy and risk-sensitive currencies like the Canadian Dollar recover lost ground.
Together, these themes have helped push USD/CAD lower for months and a recent break beneath crucial support might have opened the door for further losses. To that end, 1.2929 – the November 9 swing low – had served as an important level working to stave off further losses but with price plunging beneath, USD/CAD seems vulnerable to a continuation lower.
Should bears look to drive the pair lower, subsequent support is rather sparse until the 1.2800 area which coincides with the October 2018 swing low. That being said, USD/CAD has already fallen considerably and shorter-term recoveries are not out of the question. Given the degree to which USD/CAD has slipped over the last few months, however, prior support might serve as resistance going forward making attempted recoveries all the more arduous.
The Canadian Dollar scored a trifecta this week with crude oil prices rising to their best level since the March pandemic advent, favorable technical indicators and the continuing aversion to the American currency from the still rising COVID-19 count in the United States.FX Street
Trading in the USD/CAD this week was, as it has been for at least three months, a US dollar story.
Currency markets continue to punish the greenback for the pandemic resurgence in much of the country, though it is largely true that the areas that had the worse infections in the spring, as New York and New Jersey, do not have as numerous an outbreak this time.
The difference between the States, Europe and Canada seems to be a matter of timing, with the later surge in the US dominating headlines. It is the potential for economic damage that is the most relevant. The weakness in US payrolls underlined the negative possibilities even though Initial Jobless Claims reverted to trend at 712,000 in the November 27 week after rising to 778,000 in the previous release.
The November employment data was a clear win for the Canadian dollar but the balance of economic information is much more ambiguous. Canadian third quarter annualized GDP was weaker than expected while manufacturing PMI was on a par with that in the US. The Fed is far more active in restraining US rates, but in reality its intervention is effective against the yield curve in both markets.
The outlook for the USD/CAD is lower. A combination of momentum, weak support from two-year-old levels, and the general negative bias for the US dollar will continue to weigh on the pair. However, the speed of last week’s descent and the untraversed ranges leave the USD/CAD open to a profit-taking bounce. A possible catalyst could be a completed stimulus package in the US Congress.
Technically, the USD/CAD is heavy and the descending channel is the main formation. Support lines are weaker and far less important since they date from over two years ago and all of the resistance levels except the first at 1.2800 are of recent vintage.
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