USD/CAD: Upside Showing Teeth but Reversal Lower Developing?

Robert Petrucci

The USD/CAD has seen upward momentum develop the past week, but in early trading this morning a reversal lower has developed.

After hitting long-term lows on the 14th of January, the USD/CAD has seen some bullish momentum develop technically. However, in early trading this morning, the USD/CAD has shown the ability to mount a reversal lower, and the question speculators will ask is if this downward trend is going to be long-lived or vanish. The USD/CAD is still within a solid bearish trend and its current value is testing prices not seen since April of 2018.

The past week of trading certainly saw the USD/CAD show bullish sentiment, but the move may prove to be short-lived and be a simple cyclical reversal higher within a much bigger and long-term bearish trend. Short-term speculators need to be wary of choppy conditions, but bearish perceptions will likely prevail. Current support near the 1.27170 juncture should be watched; if this short-term mark is penetrated lower, it could mean that another test of the 1.27000 ratio can be expected.

However, trading the past week highlights that trends are not one-way directions. Speculators need to be ready for moves that go against their wagers, and stop losses should be used to maintain stability within trading accounts. Being stubborn can often prove costly. Believing in a mid- or long-term trend can be completely different when compared to short-term perceptions. The reality for the USD/CAD the past week of trading has been bullish, and speculators who want to continue to wager on the downside need to be careful.

Traders looking to sell the USD/CAD may want to use a more conservative amount of leverage and a wider stop loss ratio near term to protect themselves against upside movements. Resistance near the 1.27570 mark may prove to be an adequate stop loss juncture. Traders looking for big bearish moves to reignite may have to modify their outlook near term and simply be happy with smaller moves while choppy conditions prevail.

Technically, the bearish trend of the USD/CAD remains the logical tactical perception, but traders need to acknowledge that short-term trading may prove a challenging landscape. Selling the USD/CAD with limit orders near existing resistance junctures within the 1.27440 to 1.27550 levels may prove to be a worthwhile wager on downside action developing.

Canadian Dollar Short-Term Outlook:

  • Current Resistance: 1.27570
  • Current Support: 1.27170
  • High Target: 1.27840
  • Low Target: 1.26900

USD/CAD chart

Robert Petrucci
Robert Petrucci has worked in the Forex, commodity, and financial profession since 1993. Important aspects of his work involve risk analysis and advisory services. As an advisor in a Family Office he maintains a conservative approach for wealth management and investments. Robert also works in private finance with investors and companies delivering financial and management services.

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