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USD/CAD Forecast: Gives Up Early Gains Against CAD

The US dollar initially tried to rally during the trading session on Wednesday but gave back the gains in order to form a less than impressive candlestick. The downtrend line above has offered resistance, and it certainly looks as if we could continue to drift lower, but this is going to have a lot to do with the oil market and of course the interest rates coming out the United States. The bond yields fell during the trading session as the auction of treasuries went really well during the trading session.

Looking at this chart, you can see that there is significant support just below the 1.26 handle, so it is worth paying attention to that region as it has offered so much support. Furthermore, the 1.25 level underneath is a massive support level on the monthly charts, so therefore if we were to break down below there, it could be the beginning of something rather brutal. It is because of this that I believe that the market is likely to continue to be very jittery and noisy, because the factors involved are so close to major movement. After all, the oil market has become stretched, just as the interest rate situation had gotten a bit out of hand.

If we were to turn around and break above the 50 day EMA, that would be a very bullish sign not only due to the fact that we have broken above a shooting star, but also a trendline. All things being equal, the market is likely to go looking towards the 1.28 handle, and then the 1.30 level. The 1.30 level of course is a large, round, psychologically significant figure, and of course where we see the 200 day EMA coming into the picture. With that being the case, if we were to break above the 1.30 level at that point you would have to assume that the longer-term trend has changed.

If we were to break down below the 1.25 handle, then it is very likely that we are going to go looking towards the 1.20 level, which is the next large, round, psychologically significant figure. I do not how quickly we get there, but it would be the potential “trapdoor effect” that we could see the market crater and go looking towards lower levels.


Christopher Lewis
About Christopher Lewis

Christopher Lewis has been trading Forex for several years. He writes about Forex for many online publications, including his own site, aptly named The Trader Guy.

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