Canadian Dollar (USD/CAD) Outlook:
- USD/CAD broke through resistance around 1.32 on Wednesday, allowing for a continuation higher
- Reclaiming the 200-day simple moving average and an ascending trendline, the pair will now look to enjoy various levels of technical support
- IG Client Sentiment Data reveals retail traders are piling into the short side, a potentially bullish sign
USD/CAD Outlook Bolstered as Resistance Fails
Coronavirus fears, corporate earnings and Wednesday’s FOMC decision have sparked a considerable amount of volatility this week. Nevertheless, USD/CAD has continued its charge higher after rebounding from lows around 1.2950 throughout the month of January. The rally has had a few influential factors, but commentary on the state of the Canadian economy from Bank of Canada Governor Stephen Poloz likely helped extend CAD weakness. With the FOMC meeting in the rearview, can the USD/CAD rally continue?
USD/CAD Daily Price Chart
To that end, the most recent leg of the USD/CAD rally was able to surmount the 200-day simple moving average and a horizontal barrier which has opened the door for further gains. Subsequent resistance should exist around 1.3350 as the level has displayed an ability to influence price in the past. On an intraday basis, potential resistance resides around 1.3286, but I am hesitant to suggest it has the merit to halt a rally of this magnitude.
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If the rally does come into question, USD/CAD will look to enjoy various levels of nearby support. First and foremost is an ascending trendline dating back to September 2017. Until late December, the level was unbroken despite various tests since its inception.
Consequently, a rebound above the line is an encouraging sign in pursuit of a continuation higher but greater distance between the spot price and the area would provide more confidence. Coupled with the explosion in long interest from retail traders, there are cases to be made for a bullish continuation, but risks certainly remain. In the meantime, follow @PeterHanksFX on Twitter for updates and analysis.
–Written by Peter Hanks, Junior Analyst for DailyFX.com
Contact and follow Peter on Twitter @PeterHanksFX