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USD/CAD Forecast: USD Trying Rally Against CAD

By Christopher Lewis
Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.

The US dollar has fallen during a large portion of the trading session on Monday but continues to find support in the same general vicinity, just below the 1.25 handle. By bouncing the way, we have late in the day, it suggests that the market is going to continue to bounce around in this general vicinity, as we had recently formed a couple of hammers, as well as a couple of shooting stars. This shows confusion and hesitation, which just happens to be at a major support level.

When I look at this chart, I recognize that the Wednesday candlestick from last week is crucial. If we were to break down below that hammer, then it is likely that the market could go looking to reach the 1.24 handle, perhaps even lower than that rather quickly. The market is likely to go looking to the 1.23 level underneath, maybe even the 1.2250 level. If we were to break through all of that, then the Dollar could drop to the 1.20 level. This would almost certainly have something to do with a massive move in the oil market because quite frankly the interest rate differential between the two currencies would not justify that type of move.

The 50 Day EMA is starting to break below the 200 Day EMA indicator, getting ready to form a “death cross.” I am not a huge fan of this indicator, but some traders will start to short based upon that alone. I think if we get both this and a break of the hammer from last week, then it is likely that we go lower. On the other hand, if we were to turn around a break above the couple of inverted hammers that formed just over the last couple of days, that could open up a move to the 1.26 handle, maybe even eventually all the way up to the top of the consolidation area, which is the 1.28 level.

The only thing I think you can count on right now is a lot of choppy behavior, but we will get some type of impulsive candlestick that we can follow. We either break the inverted hammers from last week, or we break down below the hammer from the same week. Once we get that move, I will either get long or short of this pair based upon that.

USDCAD

Christopher Lewis
About Christopher Lewis
Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.
 

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