Canadian Dollar Technical Analysis: USD/CAD Weekly Insights
- A bullish breakout for USD/CAD shows potential for a sustained upward trend towards new highs.
- The pair approaches critical resistance levels, with key economic data releases from the FOMC and Core PCE influencing market sentiment.
- Key resistance levels are identified at 1.4189-1.42, 1.4357, and 1.4538, while support is observed at 1.3984/90, 1.3881/99, and 1.3773.
The US Dollar appears set to achieve its fourth consecutive weekly advancement against the Canadian Dollar, as USD/CAD moves to establish fresh multi-year highs. Market participants are keenly awaiting updates from the Federal Reserve regarding interest rate decisions, influencing trading dynamics.
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USD/CAD Weekly Price Chart
Chart prepared by Michael Boutros, Senior Technical Strategist; USD/CAD on TradingView
Technical Preview: In the previous Canadian Dollar Technical Analysis, we acknowledged the USD/CAD rally hitting resistance levels. We emphasized the importance of maintaining pullbacks above 1.3881 to support a bullish trajectory, necessitating a close above 1.42 for further gains. After a two-week consolidation, USD/CAD broke above this resistance, achieving over a 2.3% increase since the beginning of the month.
A minor adjustment to our framework keeps USD/CAD within an ascending pattern traced from the September lows. Initial resistance is now focused on the high-week close from 2020, marked at 1.4357, bolstered by other critical levels at the 1.618% extension of the 2023 advance at 1.4482 and the close high of 2016 at 1.4538. The upper trend line aligns with these levels as we approach year-end, marking potential points of price inflection if reached.
Initial weekly support is positioned at 1.4189-1.42, with the medium-term upward trend now requiring validation above the median-line intersection around 1.4098-1.4115. A breach below this line could imply a significant top formation, risking a larger corrective phase within this yearly bullish trend. Additional support levels to monitor include the 2020 March close at 1.3990 and the recent high-week close from 2022 at 1.3881/99.
Conclusion: The USD/CAD breakout nears initial resistance levels with substantial economic events approaching the week’s end. Technically, the outlook remains optimistic while prices hold above the median-line at 1.41. From a trading perspective, any declines should ideally be contained above this week’s low as we seek a close above 1.4358 to maintain momentum towards the upper trend line near 1.4480, where a notable reaction is anticipated.
Be mindful of the forthcoming FOMC interest rate announcement and essential US inflation data due later this week. Stay agile through these events and observe the weekly close for actionable insights. For a more granular perspective, refer to my latest analysis on the short-term outlook for the Canadian Dollar.
Economic Data Releases: US/Canada
Economic Calendar - upcoming data releases and events that may impact the market.
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--- Analysis by Michael Boutros, Senior Technical Strategist at FOREX.com
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